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Edited version of your private ruling
Authorisation Number: 1012546145822
Ruling
Subject: Insurance proceeds
Question:
Do the capital gains tax (CGT) provision apply to the payout amount received from the insurance company for the replacement of the contents damaged by floods in your investment property?
Answer:
No
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on
1 July 2012
Relevant facts and circumstances
Your rental property was affected by floods in early this year.
Your insurance company paid your builder directly to repair the property.
Your insurance company paid you a specified amount for the contents.
The total cost of these fixtures and fittings was a specified amount with a written down value of a specified amount.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-24
Income Tax Assessment Act 1997 Division 40
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.
If a depreciating asset is wholly used for taxable purposes, a balancing adjustment amount may arise and no capital gain or capital loss arises.
In your case, your rental property is wholly used for taxable purposes so the CGT legislation does not apply.
Therefore, you will need to calculate the amount you need to include in your assessable income under Division 40 of the Income Tax Assessment Act 1997.