Tax deductibility of insurance before settlement and establishing replacement cost

[Bantam Roosta]

If I get building insurance at the time of signing a contract, does it become deductible from that time, even though it is not producing any income for me until settlement?

Also, how do I establish the replacement cost of the building and the value of the contents for the insurance? The depreciation schedule would hold this information I assume, but this wouldn't be done until later in the process, not on contract date. The insurance calculators do an estimate, but this must be fairly rough.

BR

 

[Paul@PFI]

If the property will later be rented its deductible. The timing of the expense falls under the "incurred" rules and its just pre-paid. The intent after settlement is what is important. (eg earn rental income)

Insured value is different from "cost" which is what a tax report is based on. The deprecaition report is not an ideal basis as it may exclude present value of construction and demolition etc. Check policy if it adds an extra 20% (say) for demo costs etc. The calculators insurers provides = one good measure. The report may include info to assist a calculation eg M2 area.

Over insuring is not penalised and is usually a trivial marginal cost v's what insured value should be. Under insuring on the other hand may reduce the payout lower than the policy value.

If I were insuring bldg + contenets I would question what it would cost to replace total loss at todays prices. Does the policy provide new for old ?