• Damaged or destroyed property

    If your property is damaged or destroyed in a disaster, you may receive an insurance payment. How this is treated for tax purposes depends on:

    • the type of property (your home, other buildings, cars, personal property or work-related items)
    • whether or not the property is income-producing (for example, a rental property or business premises).

    Generally, if you are able to claim a deduction for the cost of a repair, then any insurance payment you receive will reduce the amount of the deduction you are able to claim.

    In some situations you may need to calculate a:

    • capital gain or capital loss
    • balancing adjustment for a depreciating asset
    • capital works balancing deduction.

    If you receive an insurance settlement, you do not generally have to pay GST on it provided you tell the insurer before making the claim what proportion of the premium you can claim GST credits for. You can claim GST credits on the part of the premium that relates to business purposes.

    Repairs to income-producing property are generally tax deductible in the year they are incurred. If the work goes beyond restoring the original form or function, the expense may not be deductible as a repair.

    Different rules apply where property is improved or completely replaced. Where the cost of repairs includes GST, you may be entitled to input tax credits if you are registered for GST and incur the cost in carrying on your enterprise.

    See also:

  • Last modified: 27 Oct 2015QC 21526