Will I be taxed on insurance payouts?
Your Family Home – payments you receive for your main residence is not taxable.
Personal Property – payments received for personal assets (household items, furniture, boats, private cars) are not taxable.
Rental Property and Home Businesses – If you receive a payout for your rental property as a result of a disaster, you must include this amount as income in your tax return. This includes: loss of rental income, repairs and replacements and money received from a relief fund. Money provided for immediate or urgent repairs may be exempt.
If you receive an insurance payout for the loss or destruction of a capital gains tax asset any gain or loss will need to be included in your tax return.
Business trading stock – the amount you receive from an insurance payout for damaged or destroyed trading stock must be included in your tax return.
Business premises – an insurance payout for damaged or destroyed premises will have Capital Gains Tax gain or loss consequences which will need to be included in your tax return as income.
Business depreciation assets – an insurance payout for damage or destruction of depreciating assets that you use to produce income (eg: car, office equipment) will have tax consequences.
If you have been affected by the recent disasters and will be receiving an insurance payout please do not hesitate to contact our staff.
This article appeared in our February 2020 newsletter and the author is Renee Larsen