What is the tax treatment of Insurance payouts from a natural disaster?

The weather in Australia can be unpredictable, resulting in intense conditions that can cause

damage and harm to their surroundings.

Over the last few years, extreme weather conditions (such as fire, floods and intense storms) in some parts of the country have resulted in extreme damage. If this occurs, individuals need to determine the tax treatment of any insurance payouts or relief payments they may receive.

Usually, individuals are unlikely to experience tax consequences for payments for personal property or assets in events such as these. Personal property or assets include your family home and household assets.

For example, Peter owned a painting by a famous artist worth $750 that is a collectible, which was destroyed in a bushfire. The insurance payout for this painting will be included in his tax return when he works out his capital gain or loss at the end of the year.

However, if an individual’s income-producing assets incur damage, then they will need to determine the proper tax treatment of the payouts or relief payments that they receive and the costs involved in repairing or replacing the assets.

An insurance payout for a property used to produce income will have tax consequences, for example, if you used a part of your home to run a home business or you rented out a room.

The insurance payout amount will be relevant when you work out if you have a capital gain or capital loss to include in your tax return. If you are a small business operator, you may be entitled to small business capital gains tax (CGT)

concessions. If your asset is destroyed, you can roll over the CGT liability.

If you have been working from home and using personal assets to produce income (such as a personal laptop you are repurposing) then determining which tax treatment applies could get complicated. You may have to talk to the ATO or us to clarify the specificities of your situation.

< Older Post Newer Post >

Farewell Deryn

By Jodie Cunningham • 08 Sep, 2023

Deryn worked for Logan & Hall for over 32 years. She was originally employed in an administration role which she continued to do until she left in 1984 to start her family having children Jane and then David. Deryn returned to Logan & Hall in around 1990 as the Office Manager where she also completed some accounting courses. Deryn eventually went onto managing all the office Self-Managed Super Funds including preparation and lodgement of these returns. During her time at Logan & Hall, Deryn built strong relationships with her clients and will be missed by them we’re sure. Outside of work, Deryn is also well known in the Swan Hill Community with her involvement with the Swan Hill Show and Swan Hill Women in Racing. Deryn could also be found on the golf course. You may have even shared a glass or two of bubbles with Deryn along the way. We treasure the many years we have had with Deryn both at work and personally. She will be missed around the workplace, but we will be keeping in touch. Deep will now be managing the Self-Managed Super Funds and can take care of any queries you may have.

2023-24 Federal Budget Announcements

By Jodie Cunningham • 02 Jun, 2023

The Federal Budget was handed down on the 9 May, 2023, outlining a number of changes that impact businesses, tax & superannuation.

Offsetting Business Losses in the Current Year

By Jodie Cunningham • 05 Apr, 2023

A non-commercial business loss is a loss you incur, either as a sole trader or in partnership, from a business activity unrelated to you primary source of income. This type of business activity could be a hobby or lifestyle benefit.