Insurance Recoveries and Primary Production

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Insurance Recoveries and Primary Production

Are you?	- A live stock farmer or owner of a timber plantation?
At a glance:	- Farming businesses may be compensated by their insurance policies for the loss of business live stock or trees in a plantation. But how are these insurance recoveries treated for tax purposes?
You should:	- Be aware of the tax treatment of insurance recoveries received. - Contact us if you require any clarification or advice.

1.	Generally, taxpayers in receipt of insurance recoveries for the loss of trading stock must include the amounts received as assessable income in the year in which the amounts are received.
2.	However, some concessions exist which allow eligible taxpayers to spread the insurance recoveries over a 5 year period on a straight line basis. These include: • Insurance recoveries received for the loss of live stock by reason of drought, fire, flood, disease or any other disaster; and • Insurance recoveries received for the loss of trees (timber) by fire.
3.	In order to claim a concession, an election must be made, failure to which the whole amount will be taxable in the year of receipt.
4.	Insurance recoveries received as compensation for the loss of income or profits that would have been derived from the trees in a plantation, planted or tended in the course of carrying on a business of forest operations are assessable in their entirety when received.