As you can imagine, we get all sorts of weird and wonderful stories when we have clients come in to get their tax returns done at the end of the financial year.
Damage to an investment property
Sadly, one of my clients had the misfortune of having her investment property catch on fire.
The house wasn’t destroyed but there was a big hole in the roof.
She made a claim on her insurance and they paid out quite a substantial amount of money.
Happy days… until it became time for her to lodge a tax return.
The not-so-good impact on tax
The insurance proceeds that she received were actually taxable income for her.
That’s right – taxable income that needs to be included in her tax return.
She hadn’t spent any of that money on repairs to the property, so there were no deductions that we could claim against that big payout that she had to show as income.
It was quite unfortunate. She ended up with a large tax bill, and when going on to sell the house, because she hadn’t undertaken any repairs, she got a much lower return.
Tell your accountant first
When something like this occurs, it’s important to inform your tax accountant as soon as possible.
We can advise on the applicable options available for you, and help you to end up in a good tax position.