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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 86: Insurance for North Island flooding event damage causing disposal: optional timing rule for income, deductions

You could also call this:

“Choose when to report insurance payouts and costs for North Island flood-damaged property in your taxes”

This law is about how you can choose when to include insurance money and costs in your taxes if your property was damaged by flooding in the North Island. You can use this rule if your property was damaged by the floods, you’re getting insurance money for it, and you choose to use this rule for all your damaged property.

If you know how much insurance money you’ll get before the end of the 2027-28 tax year, you can include that money and any money from selling the damaged property in your taxes. You can do this in the 2027-28 tax year or earlier if you know all the costs and money involved.

For the costs of getting rid of the damaged property and the loss in value, you can include these in your taxes in the 2027-28 tax year. Or, you can include them earlier if you know all the costs and money involved.

This rule changes when you usually have to report these things in your taxes. It overrides other rules about when to report money from insurance, selling property, and the costs of getting rid of property.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS952997.

Topics:

Money and consumer rights > Taxes

Housing and property > Home safety and repairs

EZ 85: Item treated as available for use if access restricted due to North Island flooding events, or

“Assets unavailable due to North Island floods still count as usable for tax purposes”

EZ 87: Insurance for repairs of North Island flooding event damage: optional timing rule for income, deductions, or

“Optional delay for reporting flood insurance and repair costs until 2027-28”

Part E Timing and quantifying rules
Terminating provisions: Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 86Insurance for North Island flooding event damage causing disposal: optional timing rule for income, deductions

This section applies for a person and an item of depreciable property when—
the item is damaged by a North Island flooding event; and
the damage—
1. results in the item being affected by a disposal and reacquisition under section EZ 83; or
2. meets the requirements of section EE 47(4) (Events for purposes of section EE 44); and
the person is entitled to an amount of insurance or compensation for the damage to the item; and
the person chooses to apply this section for all items of depreciable property meeting the requirements of paragraphs (a) to (c).

If the amount of insurance or compensation for the damage (the insurance receipt) is derived or able to be reasonably estimated before the end of the 2027–28 income year, the person’s income from the insurance receipt and the consideration derived from the disposal of the item are attributed to the earlier of—
the 2027–28 income year:
the first income year in which—
1. the amount of the cost of disposing of the item (the disposal cost) is, or has been, incurred or able to be reasonably estimated; and
2. the insurance receipt is, or has been, derived or able to be reasonably estimated; and
3. the consideration from the disposal of the item is, or has been, derived or able to be reasonably estimated.

If the disposal cost is incurred or able to be reasonably estimated before the end of the 2027–28 income year, the person’s deductions for the disposal cost and for depreciation loss under section EE 48 (Effect of disposal or event) are attributed to the earlier of—
the 2027–28 income year:
the first income year in which—
1. the disposal cost is, or has been, incurred or able to be reasonably estimated; and
2. the insurance receipt is, or has been, derived or able to be reasonably estimated; and
3. the consideration from the disposal of the item is, or has been, derived or able to be reasonably estimated.

This section overrides sections EE 1, EE 22, and EE 48 (which state when depreciation loss and depreciation recovery income arise) in relation to the timing of the person’s—
income from the insurance receipt and consideration from the disposal of the item:
deductions for the disposal cost and depreciation loss.

Notes

Section EZ 86: inserted (with effect on 1 April 2022), on 28 March 2024, by section 73(1) (and see section 73(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).