| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011531196254
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Insurance payout
Will your insurance payout for your damaged business vehicle be included in your assessable income?
Yes.
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You have a motor vehicle, which you use as a business asset. It has been fully written down for depreciation purposes. The vehicle was cosmetically damaged by hail and you received an insurance payout from your insurer for the damage. You have decided not to repair the structurally sound and safe vehicle and continue to hold it.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 20-20
Income Tax Assessment Act 1997 Section 20-25
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Subsection 20-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997) includes an amount you receive as a recoupment of a loss or outgoing in your assessable recoupment if:
· you received the amount by way of insurance or indemnity, and
· you can deduct an amount for the loss or outgoing in the current year, or you have deducted or can deduct an amount for it for an earlier income year, under any provision of this Act.
However, subsection 20-25(5) of the ITAA 1997 excludes an amount you receive as assessable recoupment when the recoupment amount serves as the termination value of the depreciating asset.
In your case, a balancing adjustment (termination) event will not occur because you will continue to hold your depreciating asset. It follows the exclusion under subsection 20-25(5) of the ITAA 1997 will not apply and the treatment under subsection 20-20(2) of the ITAA 1997 will apply.
Your insurance payment is an assessable recoupment under subsection 20-20(2) of the ITAA 1997 and must be included in your assessable income.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
