Section EI 2 — Income Tax Act 2007: Interest from inflation-indexed instruments

EI 2 Interest from inflation-indexed instruments When this section applies (1) This section applies when— (a) an amount of money lent is outstanding at the end of the lender’s current income year; and (b) an amount is payable to the lender for the money lent, in a future income year of the lender; and (c) the amount payable is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and (d) the amount payable that has accrued at the end of the lender’s current income year differs from any amount payable that had accrued— (i) at the time the money was lent, if it was lent during the lender’s current income year; or (ii) at the end of the lender’s previous income year, if it was lent before the lender’s current income year. Increase treated as credited (2) If the difference is an increase, the increase is treated as having been credited in account and capitalised by the borrower for the benefit of the lender on— (a) the day following the day on which the level of the relevant index at the end of the lender’s current income year becomes public knowledge; or (b) if the level of the relevant index is not calculated for the end of the lender’s current income year, the last date before the end of the income year for which the level is calculated. This subsection is overridden by subsection (3). Increase not treated as credited (3) An increase is not treated as having been credited to the extent to which— (a) the money lent has been repaid: (b) an amount on account of the increase has already been paid to the lender: (c) the increase represents a recovery of a decrease in the amount payable over an earlier income year of the lender. Defined in this Act: amount , income year , interest , money lent , New Zealand , pay , Compare: 2004 No 35 s EI 2