Blog: News & Natural Disaster Damage Claims

Blog/ News & Damage from Natural Disasters



2020 Federal Budget: How it affects small business & business depreciation.

 The JobMaker Plan: eligible businesses with an aggregated turnover under $5 billion will get an immediate tax deduction for the full cost of new eligible depreciable assets acquired, start to use or installed ready for use between 7:30pm AEDT on 6 October 2020 and 30 June 2022.

For small and medium sized businesses (with aggregated turnover under $50 million), full expensing also applies to eligible second-hand assets.

The existing enhanced instant asset write-off incentive has been extended for 6 months to 30 June 2021 and is available for assets first used or installed ready for use before that date.

Small businesses (with aggregated turnover under $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.

The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out of the regime will continue to be suspended.


For Sole Traders and Businesses with aggregated annual turnover of < $500 million 

(1) The increased instant asset write-off

The instant asset write-off threshold has been increased from $30,000 to $150,000 and expanded access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million). This applies from 12 March 2020 until 30 June 2020, for new or second‑hand assets first used or installed ready for use in this timeframe.

The higher IAWO (Instant asset write-off) threshold provides cash flow benefits for businesses that will be able to immediately deduct purchases of eligible assets each costing less than $150,000. The threshold applies on a per asset basis, so eligible businesses can immediately write‑off multiple assets.


The IAWO is due to revert to $1,000 for small businesses (turnover less than $10 million) from 1 July 2020.

(2) Backing Business Investment (BBI) 

A time limited 15 month investment incentive to support business investment and economic growth over the short term, by accelerating depreciation deductions. This applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021. Businesses with a turnover of less than $500 million will be able to deduct 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost

The Benefit & Eligibility Rules


  • (1) benefit — deduction of 50 per cent of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance  of the asset’s cost
  • (2) eligible businesses — businesses with aggregated turnover below $500 million
  • (3) eligible assets — new assets that can be depreciated under Division 40 of the Income Tax Assessment Act 1997 (i.e. plant, equipment and specified intangible assets, such as patents) acquired after announcement and first used or installed by 30 June 2021. Does not apply to second -hand Division 40 assets, or buildings and other capital works depreciable under Division 43
  •  (4)  Applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021.


        Apply at the ATO website link below.


under new laws in ATo publication ‘rental properties 2018’:for contracts after 9th May 2017 there is no more depreciation for second hand plant assets in residential rental properties purchased for deriving rental income only unless the property is used for conducting a business including a rental property business or you are an excluded entity. if you rented the property after 9th May 2017 having purchased it earlier then no second hand assets can be depreciated. 

newly built buildings or substantially renovated buildings in which all or substantially all the building is removed or replaced which had contract dates after 7.30pm 9th may are eligible for plant depreciation providing no one was eligible to claim that plant depreciation earlier and either you acquired it new before anyone had occupied it or you acquired it within 6 months of construction completion

stop press: excluded entities can claim depreciation on plant in residential properties with contracts after 9th may 2017

an excluded entity that can claim depreciation on second hand plant assets in residential properties with contracts signed after 9th may 2017 are:

1.a corporate tax entity
2.a superannuation plan that is not a smsf
3.a public unit trust
4.a managed investment trust
5.a unit trust or partnership


Depreciation rights for property owners on leasehold land

I have often been asked whether property investors in property built on leased land are entitled to depreciation on that property.

The ATO has ruled that lessees of land that hold a depreciating asset that is fixed to leased land are the holders of those assets for the time they have the right to remove those assets. Hence, as the holders of those assets they have the right to depreciation on those assets. 

If a lessee or owner of certain other rights over land eg. an easement improves the land with a depreciating asset that person is the holder of the asset if the asset is for their own use even though they have no right to remove it from the land eg an asset like an irrigation system on a farm. They remain the holder for the time that the lease or right exists. Hence, as the holder of the asset the lessee can claim depreciation on that asset.


Small business: Instant write off and simplified depreciation

Starting from budget financial year 2019-2020 small business assets below the value of $30,000 will qualify for an instant write-off. The new instant write- off will apply to any number of assets bought below the value of $30,000 but any purchases above $30,000 will be depreciated under the single pool at a 30% rate. Newly acquired assets over $30,000 are deducted at 15% (half the pool rate) for the first income year.

Leasing Business Assets

Starting from the 2012-2013 financial year small businesses will also be allowed to depreciate most other assets in a single pool at a 30% rate. The long life pool no longer exists. If you had a long life pool its closing balance is rolled over to form part of the opening balance of the general small business pool for the 2012-2013 financial year.



Business & Rental Property Claims for Flood/Cyclone Damage

The repair or replacement of damage a natural disaster causes to a rental property or tangible business assets affects the expenses you can claim & the income you need to report for rental properties but insurance payouts for work related items or houses used as business premises is not taxable.

These insurance payouts don’t have to be included as income in your tax return.

If the destroyed asset was a depreciating asset then an insurance payout less the closing adjustable value of the depreciating asset at it’s time of destruction is then treated as income or as a deduction in your tax return depending on whether the insurance payout was greater than the closing adjustable value (which is income) or the insurance payout was less than the closing adjustable value (which is a deduction). (A depreciating asset is an eligible asset under current ATO legislation that is used in the production of income either in a business or a rental property).

Where a depreciating asset was destroyed/loss by a bushfire then you may be able to offset any amount of assessable income from an insurance payout with the cost of replacing that asset. The destruction or loss of an asset is an involuntary disposal of a depreciating asset in which the balancing adjustment amount such as income where the insurance payout is greater than the closing adjustable value is offset against the cost of acquiring one or more replacement assets.

For depreciating assets used wholly or partially for private purposes then the percentage use of that asset for private purposes expressed as a percentage of its total value is treated as a capital gain (insurance payout greater than its private use percentage of total value) or capital loss.


We Can Maximise your Up-front Cash flow from Depreciation

We do this by apportioning each plant item & capital works into the cost of your interest in the asset

By allocating depreciation to each holder of the asset based on their interest in the plant asset or capital works then more plant becomes low-value pool or $300 items if eligible maximising the depreciation for that asset

An insurance payout for damaged or destroyed houses that were not only ever used as a principal place of residence need to be taken into account for Capital Gains Tax (CGT)purposes. If the house was only ever used as a principal place of residence there is no CGT applicable. If you used the house as a rental property then the insurance payout has to be deducted from the cost base ie. what you originally paid for the house less any capital works deductions (Division 43) claimed during income production years to calculate CGT.

You can claim deductions for repair to property where it is tenanted or genuinely available for rent. For the cost of repairs to be an allowable deduction your property would have to be rented out immediately prior to repairs being needed & the damage being repaired would have to have occurred during the rental period.

Cost of repairs to rental properties can be claimed as deductions providing you do not have to re-build or replace an entire structure which is identified as a separate item of capital equipment like a fence, stove, kitchen cupboards or a refrigerator. This means you cannot claim the entire replacement cost in the year it was incurred but you may be able to claim the cost over a number of income years as a depreciating asset deduction (Division 40 plant) or capital works deductions (Division 43). An improvement of the asset that is new, improves the income generating ability of the asset & is not a mere like for like replacement of that asset can also be claimed as a depreciating asset deduction or capital works deduction. If you receive an insurance payout for these repairs then this is treated as assessable income.

A repair to depreciating assets in a rental property is an allowable deduction. For example if you just repair carpet damaged by flood you can claim a deduction for the repair. If you replace that whole flood damaged carpet then you can claim a deduction for the closing adjustable value of the carpet that was removed and depreciation on the new carpet. Initial repairs for example remedying defects, damage or deterioration that existed at the date you acquired the property are regarded as capital expenditure & can be claimed as capital works deductions.

When a property is destroyed by a natural disaster the costs to rebuild can be depreciated as capital works and depreciating assets (plant). If the rental property that is destroyed had eligible capital works deductions then the closing adjustable value (or the remaining capital works expenditure which has not yet been deducted at the time of destruction) can be deducted but this closing adjustable value is reduced by any compensation you receive for the capital works destruction. This applies even if the destruction is voluntary. The deduction can be claimed in the income year in which the destruction occurs