Dessent and Commissioner of Taxation (Taxation)

This matter concerned an appeal by Mathew Dessent against a decision of the Commissioner of Taxation. Mr Dessent had received an insurance payment of $250,000 following damage to a rental property. The Commissioner treated this payment as an assessable recoupment under section 20-20 of the *Income Tax Assessment Act 1997* (Cth) and issued amended assessments increasing Mr Dessent's taxable income for the 2017 and 2018 income years by the amounts he had claimed as deductions for repairs to the property. Mr Dessent objected to these amended assessments, which were disallowed by the Commissioner, leading to the present review.

The primary legal issue before the Tribunal was whether the $250,000 insurance payment received by Mr Dessent constituted an assessable recoupment under section 20-20 of the *Income Tax Assessment Act 1997*. This required determining if the payment was received by way of insurance and if an amount could be deducted under the Act for the loss or outgoing in the current or an earlier income year. The Tribunal also considered the effect of section 20-40(1) regarding the carry-forward treatment of insurance payments.

The Tribunal reasoned that the payment clearly met the first limb of the assessable recoupment criteria, as it was received from an insurer under a policy covering the loss occasioned by damage to the property, specifically for loss of rent and other benefits consequent upon that loss. Regarding the second limb, the Tribunal found it irrelevant whether the insurance money was actually used for repairs. Section 20-20(2)(b) only requires the existence of an allowable deduction for the loss or outgoing in any income year. The Tribunal noted that Mr Dessent had claimed, and been allowed, deductions for repairs to the property in the relevant years, and that future repairs would also be deductible. Therefore, both limbs of section 20-20(2) were satisfied, making the $250,000 payment an assessable recoupment.

The Tribunal affirmed the Commissioner's decision.