Loss on building demolished/destroyed by fire

Can you claim the balance of the NBV if a building demolished or destroyed by fire (Net of insurance proceeds) ?
The building will NOT be rebuilt but sold as a section

 

What does "sold as a section" mean ?
What does NBV mean ?

You do want to get tax advice since a number of tax issues occur if a building is destroyed.
- The insurance proceeds are assessable and do not produce a capital gain (since the building isnt a CGT asset)....However see below for the 2 year CGT concession for replacement assets.
- If the property was producing income at the time of the loss any residual assets shown on a QS report may be written off. Without a QS report (or existing known costs) you will encountered difficulty determining what you lost in terms of dollar value. Perhaps even $0. Its a major reason why I always recommend a QS report (if possible). Any $0 proceeds for scrap value etc may reduce the write off too.
- Any residual P&E may be written off too
- There is a 2 year CGT rollover period that needs to be understood. It can reduce the tax impacts IF you rebuild but 2 years is a short time in many cases.
- Sale of the property now may avoid GST. The longer you hold the land the more problematic it can be to argue its not subject to GST when sold.

 

What is P&E?
There was a QS report done on purchase and every addition was added to the asset register
NBV is the Net Book Value
The insurance allows a fix sum which in the event of total fire loss would first be applied to clear the site.
Any proceeds (if any) after clearing the site may or may not be applied to a rebuild.
Commercial property that has been leased it's entire life

 

@Beano - IIRC your properties are subject to ground leases ie you don't own the building, is this the case here as well? If you don't own the building, then you're subject to the tenant's insurance policy T&C. Is their policy current & does it cover demolition. So they have an obligation to rebuild or does it trigger a termination event?

(p&e - plant & equipment)

 

Where is the property?

You refer to the “section” which is an NZ term.
Marg