Businesses that are able to claim from the South African Special Risks Insurance Association (Sasria) for damage to premises or equipment from the July 2021 unrest need to be aware of the tax implications of payouts.
The destruction of an asset is a capital gains tax event. To put it in legal terms (ie, drily), “you are deemed to have disposed of your asset”.
If your office building, which some years ago cost R900,000 to build, burnt down (whether due to “insurrection” or otherwise), and you receive an insurance payment of R2 million, you have realised a capital gain of R1.1 million. If you did not have insurance against this event, you have incurred a capital loss.
Unfortunately, a capital loss does not reduce taxable income. A capital loss can only be used to reduce a capital gain. That means you will have to wait until you have a capital gain before you can use the capital loss.