Green’s Dictionary of Slang

1. (N.Z. prison) to serve a sentence; usu. modified by the pertinent number of years.

1982

G. Newbold Big Huey 247: cut out (v) e.g. – five years. Serve five years in prison.

2. (Aus. prison) to pay off fines by serving time in jail according to an established tariff.

1989		R.G. Barrett Boys from Binjiwunyawunya 193: I chalked up about $5,000 worth of fines last year [...] which I’m cutting out now.
1990		Tupper & Wortley Aus. Prison Sl. Gloss. 🌐 Cut-out. To discharge fines whilst in prison. A day in prison is equivalent to a certain amount. Many prisoners choose this option.