The claim folder
What each line should already hold
Moneysmart’s guidance on household contents insurance starts from a list: each item with what it would cost to replace now, and as much detail as you can gather about it. For a business register, that detail is the paper trail an insurer may ask for. A practical set of columns:
- An identifier, such as the item’s serial number
- Proof of purchase and the date bought
- Any warranty
- Photographs, and a note of the item’s condition
Moneysmart also suggests filming each room on a phone, so you have pictures to support a later claim and to show the items were yours. A walk through a workshop, store room or office, filed with the register, serves a business the same way.
Values drift
Why the insured value and the register drift apart
business.gov.au notes that the insurable value of many assets goes down over time, and that a policy usually won’t make up for an asset’s depreciation or for a shift in its market value. It suggests reviewing the value of your assets so you have the right level of cover. Its own example:
| Policy year | Insured for |
|---|---|
| First year | $40,000 |
| Second year | $32,000 |
Notice that the insurer’s figure is its own. It is not the adjustable value in your tax records, which follows the ATO’s effective life and method (AR-0002). A register can carry both columns side by side, which makes the gap visible at renewal.
Replacement or value
Writing about household contents, Moneysmart contrasts two approaches: cover that pays to replace a lost item with a new one (“new for old”), and cover that pays only what the item was worth, which tends to fall year by year. It also notes that most policies set limits on claims for some kinds of item. Which of these a business policy uses is in its product disclosure statement, which an insurer must give you and which explains how it settles a claim: repair, replace or cash.
When to look again
business.gov.au suggests reviewing policies when your business changes or before renewal, and names buying or selling equipment, including vehicles, among the changes. Each new line added to the register, and each line closed, is that prompt.
Worked example
The tax side of a payout
The ATO says an insurance payout for a damaged or destroyed business or income-producing asset may be taxed and need to be reported. For a depreciating asset, you compare the payout with the asset’s adjustable value at the time: if the payout is more, the excess is included in assessable income; if it is less, you can claim a deduction for the difference. The adjustable value is exactly the figure a register keeps current.
Example only · made-up figures
A machine cost $15,000, excluding GST, and is used only for the business. On the general rules, with an effective life assumed at 5 years for this example and the prime cost method, it declines by $3,000 a year. After 2 full years its adjustable value is $15,000 − $6,000 = $9,000. Then a fire destroys it. Two possible payouts:
| Payout | Adjustable value | Difference | Treatment |
|---|---|---|---|
| Payout of $11,000 | $9,000 | $2,000 | $2,000 included in assessable income |
| Payout of $7,500 | $9,000 | $1,500 | $1,500 claimed as a deduction |
Three more rules from the ATO bear on the same line:
- If the asset was also used privately, the amounts are apportioned.
- If an asset is destroyed involuntarily, for example by fire, you may be able to offset the assessable amount against the cost of a replacement asset.
- For an asset in a low-value pool and used solely to produce assessable income, you reduce the closing pool balance by the payout instead.
Out of harm’s way
Keep the register where the fire isn’t
A register kept only on a computer in the building that burns is lost with everything else. The ATO advises storing business records safe from theft, fire or flood, and making regular back-up copies of electronic records kept somewhere safe, preferably away from the premises, or in cloud storage. If records are destroyed anyway, it explains when deductions may still be claimed, which turns partly on whether you took reasonable precautions.
If a claim is refused
You can dispute an insurer’s decision with the insurer itself. If you don’t agree with the outcome, business.gov.au points to the Australian Financial Complaints Authority (AFCA), which helps small businesses resolve complaints with financial companies.