Hi,
I just wanted to get an idea of what I need to do in regards to insurance etc when a property is destroyed.
Our house burnt down a few weeks ago with no cause found for what started it.
It is all with insurance at the moment but the assessor did say that is is write off. It is a 3 bed 1 bath post war cottage on concrete stumps with hardwood timber joists and bearers.
The assessor said taht the house needs to be rebuilt up from the joist/bearers which should still be in good condition except in the lounge room where the fire started. It is only an 80m2 place with the front porch also being burnt and needing replacing which is about a 20m2 patio. The back patio is fine except minor damage and can be kept.
The assessor is quoting on demolishing the house tot he bearers and the front porch and then rebuiling to what it was.
I am just wondering how ATO views this. Do I need to get a quantity survetor out to write off the house?
Do I need to include the insurance payout as income and then the cost of rebuilding as capital?
Also as the original house is so small we would prefer to build a bigger house on the block as it is on an acre and put the payout towards a bigger place.
The insurance company would need to payout our mortgage on the property first though and then I would have to reborrow for a construction loan I guess.
Has anyone been in this situation or can offer any advice?
Thanks in advance
Renee
Interesting situation.
Is it a main residence or investment? Owned prior to 1985?
I think insurance payouts are generally tax free, but not totally sure.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
It was originally our PPOR but has been rented out as investment for the last 5 years. We purchased it in Aug 2002 and our new PPOR in Jan 2005.
The loans on our new PPOR and this Investment are linked together as we have drawn the equity out with LOC's and are currently using it to build a granny flat at another investment property as it is easier to pay for it than get a construction loan.
I am just a bit worried the bank will expect us to pay down our LOC's (which we need to pay for the granny flat build) due to the valuation on the property with the house burnt down. Or will they hold off on revaluing it until a new house has been built with the insurance payout. Do you even need to tell the bank as we can afford making the repayments on all of the loans plus we are covered for loss of rent so when that comes through the mortgage is easily paid on the burnt house till it is rebuilt (give or take a few months depending on the insurance claim time frame allowed for a rebuild) .
I was hoping someone may have an idea on what the recommended steps are.
Thanks.
Hi Re
So the bank doesn’t know that the house burnt down? I would think you would have been required to notify them. They would also be listed as an interested party on the insurance.
They could want to reduce the LOC, but if they know you are going to build then maybe not.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry,
I will have to go in and speak with the Bank manager about it. I have tried to find information about what happens considering so many people lost their homes in the floods, that there would be a few similar situations.
Renee
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