Are you a property owner? Insurance payments received for property damage or destruction may have tax implications. You should be aware of the tax implications when receiving insurance payments in relation to a property.
- How an insurance payment for a property is treated for tax purposes will depend on how the property was used.
- Property can include:
- Real estate;
- Other buildings;
- Cars; and
- Personal or work related items.
- Where a house is damaged or destroyed and is a taxpayer’s main residence, capital gains and insurance payments will not be assessable for tax purposes.
- However, to keep the main residence exemption when living elsewhere while rebuilding or repairing a home, both of the following conditions need to be satisfied:
- The occupier moves back into the home as soon as practicable on completion of building works; and
- The occupier lives there for at least three months.
- Where the property has either a partial or full income-producing purpose, insurance payments relevant to the income-producing portion may trigger a capital gains tax event or become assessable income.
- If a payout is in relation to repairing a rental property, the taxpayer is still entitled to deductions where the funds are used towards repairs as long as the amount received is included as assessable income.
- For more information and scenarios, click here.
Remember: Insurance payments in relation to a taxpayer’s main residence is ignored for tax purposes. Contact us if you require further information.