Section CZ 25 — Income Tax Act 2007: Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase

CZ 25 Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase When this section applies (1) This section applies for a person and an income year (the current year ) before the 2016–17 income year when the person,— (a) in or before the current year, derives for buildings or land (the affected property ), all of which is revenue account property,— (i) insurance or compensation, if a Canterbury earthquake as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011 damages the land and damages each building, or the neighbourhood of the building, causing the building to be useless for the purpose of deriving income and consequently to be abolished or abandoned for later demolition: (ii) an amount from a purchase by the Government from the person under section 53(1) of the Canterbury Earthquake Recovery Act 2011; and (b) in the absence of this section, would have in or before the current year a total amount of income under section CG 6 (Receipts from insurance, indemnity, or compensation for trading stock) from the insurance or compensation for the affected property that exceeds the total amount of deductions under section DB 23 (Cost of revenue account property) for the affected property; and (c) plans in the current year to acquire property (the replacement property ) replacing affected property and meeting the requirements of subsection (4); and (d) gives written notice to the Commissioner under subsection (6) in relation to the affected property. Suspended recovery income (2) The amount of the excess (the excess recovery ) referred to in subsection (1)(a) is not income of the person except to the extent of the amount (the suspended recovery income ) remaining after adjustment under subsection (3) that is attributed to an income year by subsection (5). Effect of purchase of replacement property (3) If the person incurs expenditure (the replacement cost ) to acquire replacement property,— (a) for the purposes of determining the value of the replacement property for section EA 2 (Other revenue account property), the amount of the person's expenditure on the replacement property, to the extent that it is less than or equal to the total amount of the income under section CG 6 for the affected property, is treated as being reduced by an amount calculated by multiplying the replacement cost by the excess recovery and dividing the result by the total amount of deductions under section DB 23 for the affected property; and (b) the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2 . Requirements for replacement property (4) For an item of affected property, replacement property must be a building or land that is revenue account property— (a) acquired in or before the person's 2015–16 income year; and (b) located in greater Christchurch as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011. Amount remaining at end of 2015–16 income year or when person changes intentions, is liquidated, or becomes bankrupt (5) The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when— (a) the current year ends, if the current year is the 2015–16 income year: (b) in the current year, the person decides not to replace the affected property: (c) in the current year, the person goes into liquidation or becomes bankrupt. Notice of election for affected property (6) A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must give written notice to the Commissioner— (a) by the later of 31 January 2012 and the date on which the return of income is filed for the earliest income year (the estimate year ) in which the amount of the insurance for the affected property can be reasonably estimated; and (b) if the current year is after the estimate year,— (i) for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and (ii) for the current year, by the date on which the return of income is filed for the current year. Contents of notice of election (7) A notice under subsection (6) must— (a) describe the affected property; and (b) give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and (c) give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2 ; and (d) give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year. Relationship to section CG 6 (8) This section overrides section CG 6 . Defined in this Act: amount , deduction , income , income year , notice , return of income Section CZ 25: inserted (with effect on 4 September 2010), on 2 November 2012, by section 19 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).