I have an earthquake damaged property (2011) in Christchurch New Zealand that has been repaired once (2014), and subsequently deemed a failed repair. After years of negotiation, the insurance company agreed to re-repair it. We are now two years into the process of engineers reports and drawings, dilapidation reports, arborist reports, architect drawings etc, all to prepare the resource and building consents, all with increasingly spiraling costs due to the extent and complexity of the repair. The insurance company have now offered to cash settle, as long as a neighbor buys the property and demolishes it, which he has offered to do. My question is, am I subject to CGT on the insurance payout? The repairs would exceed the current payout figure. But I do not intend to repair. I will sell as is where is to the neighbor and he will be contractually obliged to demolish the property at his expense. There is no CGT in New Zealand. I am an Australian resident and have a PPOR here. The property in question has been mostly a rental property for the 15 years that I have owned it. Second question, I bought the property in 2005 with my husband but as part of a settlement agreement, the title was transferred to me in full in 2014. Does my CGT start from when we purchased it in 2005, or when it became solely my property, in 2014? Also, does anyone know an accountant with experience in this scenario, damaged overseas properties, capital gains on insurance related to overseas damaged properties. Thanks!
Thank you. So is it complicated in that a regular account would manage to untangle it for me or am I best seeking help from a more specialist accountant?
Its is NOT a CGT event as such. But does have a tax impact that triggers a CGT outcome. Insurance is a assessable reimbursement and subject to special CGT rules. The proceeds will terminate the building element and plant items which were lost...Often outined in a depreciation schedule. Obviously land cant be insured. So let say the book value for the building is $60K and the insurer pays $100K then an assessable amount occurs. But other costs could impact. And it may be subject to a CGT discount. There can be many factors to consider eg unvalued assets eg fencing etc. It is well worth tax advice. There are rollover rules too. But time limits apply. But not rebuilding impacts this. Also deductions for the property will terminate since it cant produce income. Some costs may thereafer accumulate and become third element costs. Its a issue for very competent property tax advice. I have seen it several times.
