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HOW WILL A TAXPAYER DEAL WITH DAMAGED OR DESTROYED PROPERTY DUE TO DISASTERS?

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24
May

If a taxpayer is affected by a disaster, for example, a flood, bushfire or storm, then the taxpayer can claim their loss of damaged or destroyed property. If a taxpayer's personal assets such as home or household goods have been damaged or destroyed due to disaster, then there will usually be no tax consequences if the taxpayer receives an insurance payout. On the other hand, when a taxpayer’s income generating assets are damaged or destroyed, then the taxpayer needs to work out the correct tax treatment of insurance payouts they receive and their costs of rebuilding, repairing or replacing the assets. There are some other benefits that the taxpayer gets during a disaster which are listed below:

  •  Home destroyed is still treated as a home that means the taxpayer can continue to deduct the mortgage interest subject to the normal limits;
  • Selling damaged or destroyed home after rebuilding should be exempt from Capital Gains Tax (CGT);
  • Selling a land without rebuilding, the taxpayer will still be eligible for the main residence exemption from CGT;
  • Claiming deductions for repairs, such as rental property or business premises, capital items, and unoccupied properties;
  • Claiming an immediate deduction for the replacement or repair of the fence.

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