Is an Insurance Payout taxable Income (Damage)

Discussion in 'Accounting & Tax' started by Ryan23, 9th Jun, 2019.

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  1. Ryan23

    Ryan23 Well-Known Member

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    Good Morning,
    Hoping I can get some opinions as I'm struggling to find a clear answer.
    My property was damaged by some water leaking through the roof and damaging the internal ceiling. After the insurance process I was given a cash settlement for the damage. Due to the length of the insurance process It is highly likely I will not have the repairs done by the end of this financial year.

    Does the insurance payout become taxable income? or when the repairs are completed next financial year do I just not deduct them.

    Thank you
    Ryan
     
    Ryan23, 9th Jun, 2019
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes it would be income
     
    Terry_w, 9th Jun, 2019
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  3. Ryan23

    Ryan23 Well-Known Member

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    Thanks Terry, if the payout for the damage and the subsequent work would be considered capital works and not a deductible repair would does that change things?
     
    Ryan23, 9th Jun, 2019
    #3
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Repairs are deductible, improvements aren't.
     
    Terry_w, 9th Jun, 2019
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  5. Mike A

    Mike A Well-Known Member

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    If the insurance proceeds are received as compensation for the destruction of a CGT asset, CGT event C1 should apply.
     
    Mike A, 9th Jun, 2019
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    Ryan23 likes this.
  6. Ryan23

    Ryan23 Well-Known Member

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    Does that change if the payout is taxable income?
     
    Ryan23, 9th Jun, 2019
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  7. Mike A

    Mike A Well-Known Member

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    it changes whether it is a balancing adjustment or a CGT event
     
    Mike A, 9th Jun, 2019
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  8. Ryan23

    Ryan23 Well-Known Member

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    Thanks Mike ill do some researching
     
    Ryan23, 9th Jun, 2019
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    Mike A likes this.
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