Is Commercial Property Insurance Tax Deductible?
General information only. This page explains how the deductibility rules commonly apply to commercial property insurance in Australia, based on published ATO guidance. It is not personal tax advice and does not take your specific circumstances into account. Confirm the detail with your accountant before you rely on it, particularly if your property is held by a company, a trust, or a self-managed super fund.
Is commercial property insurance tax deductible?
Quick answerYes, generally. If you own a commercial building that produces rental income, or you run your business from a property you own, the premium for building, contents, public liability and loss-of-rent insurance is treated by the Australian Taxation Office as a normal deductible expense of earning that income. The main thing that changes the answer is your entity type and when you paid the premium, both covered below.
You are the one who has to get this right on your own tax return, so here is the honest version rather than a marketing one. The rule is genuinely simple at its core: insurance on an asset that earns you income is a cost of earning that income, and the ATO treats it that way. Where it stops being simple is the detail: how much of a $50,000 shed policy is business, when you are allowed to claim a premium you paid in June for cover that runs into next financial year, and what happens on your tax return if that shed later burns down and the insurer pays out. This page walks through each of those honestly, and tells you plainly where to stop reading and start talking to your accountant.
One quick note before we go further. This page is about whether your insurance premium is tax deductible. If you were looking for cover that pays the cost of an ATO audit itself, that is a different product called tax audit insurance, which now sits inside our management liability insurance.
Does it matter whether I'm a landlord or I run my business from the building?
Quick answerNo, not for the basic rule. Whether you are a landlord earning rent or a business owner trading from a property you own, insurance on that property is deductible on the same basis, because both of you are insuring an asset that earns you assessable income. What differs is which other rules also apply to you (covered in the sections below), not whether the premium itself qualifies.
As a landlord, the ATO specifically names building, contents, public liability and loss-of-rent insurance as immediately deductible rental expenses, provided the property is rented or genuinely available for rent. If you own a strata-titled commercial unit and the building insurance is bundled into your body corporate levies rather than billed to you directly, the ordinary annual levy that funds it is still deductible the same way. The one exception: a one-off special levy raised to fund a specific capital repair or rebuild is treated as capital, not an immediate deduction, even if the shortfall it is covering is an insurance one.
As a business owner trading from your own premises, building, contents, business interruption and liability insurance are all named by the ATO as ordinary deductible operating expenses. The only qualifier: you can only claim the business portion if any part of the premises or the cover also serves a private purpose, which we cover below in "What isn't deductible".
Can I claim the whole premium this year, or do I have to spread it out?
Quick answerMost landlords and small businesses can claim an annual insurance premium as an immediate deduction in the year they pay it, under the ATO's "12-month rule," even if the cover period runs into the next financial year. Some entities don't get this concession and must spread the deduction across the cover period instead. Which applies to you depends on your entity type and whether you are "carrying on a business," so this is a question for your accountant, not a general answer this page can give you.
Here is the rule in plain terms. If you are an individual landlord, or your business has an aggregated turnover under $50 million, the ATO's 12-month rule lets you deduct the whole premium in the year you paid it, provided the cover period is 12 months or less. That $50 million figure is not a typo: the concession covers small business entities outright, and since 1 July 2020 it has also reached medium-sized businesses up to that threshold. Compulsory day-by-day apportionment of the deduction across the cover period only becomes mandatory once your aggregated turnover reaches $50 million or more. That covers the overwhelming majority of landlords and business owners.
It does not cover everyone. A company or trust that holds a commercial property purely as a passive investment, isn't itself carrying on a business, and doesn't qualify as a small business entity, sits outside that concession and generally has to apportion the deduction day by day across the cover period instead, even for an ordinary 12-month policy. Self-managed super funds have their own separate wrinkle again, covered in the FAQ below.
This is genuinely entity-specific, so we will say it plainly rather than guess for you: ask your accountant which rule applies to your structure before you decide when to claim a premium, especially if your property is held in a company, a trust, or a fund rather than in your own name.
The GST trap that catches landlords and business owners out at claim time
Quick answerIf you are registered for GST, you can generally claim a credit for the GST included in your insurance premium. But the ATO requires you to tell your insurer your correct entitlement to that credit before or at the time you make a claim. Get this wrong, and the ATO can require you to pay GST on part of your insurance settlement, on top of a payout already reduced for the credit you were entitled to.
Here is why this catches people out. Insurers generally reduce a cash settlement by the input tax credit you are entitled to claim, whether or not you actually told them about it. So if you understate, or never mention, your GST entitlement, you can end up worse off twice: once because your settlement was already reduced for a credit you didn't claim, and again because the ATO can treat the understated portion as if you had made a taxable sale, meaning GST becomes payable on it. This is a genuinely easy mistake for a landlord with a mix of commercial and residential property, or any owner whose GST position isn't perfectly simple, to make by accident rather than through any dishonesty.
Checking that your correct GST entitlement is on file with your insurer, before a claim ever happens, is exactly the kind of paperwork detail a broker should be checking for you.
What isn't deductible, and what if the property is only partly for business?
Quick answerTwo things fall outside the general deduction: capital costs (an insurance premium itself isn't one, but a special levy raised for a capital rebuild is) and any part of a premium that relates to private or domestic use rather than earning income. If your property, or your policy, covers both business and private use, you can only claim the business portion, worked out on a fair and reasonable basis such as floor area or time.
A mixed-use example makes this concrete: if you live above your shop, or a portion of an industrial shed is genuinely used for storing your own boat rather than stock, the insurance premium needs to be split between the two uses, and only the business share is deductible. There is no single ATO formula for splitting an insurance premium specifically, so the standard is simply a reasonable, defensible basis, applied consistently year to year. If any part of your situation is mixed, that split is worth doing with your accountant rather than guessing a percentage.
Do I pay tax if my insurance claim gets paid out?
Quick answerIf the payout is for a personal asset, it is not taxed. If it is for a business or income-producing asset, such as your commercial building or the rent you would have earned, it generally is taxed, though not always straightforwardly, and the outcome depends on what was damaged and what you do with the money next. This is the most technical part of the whole topic, so treat what follows as an overview, not a calculation.
A payout for lost rent, or for lost profit under a business interruption policy, is treated as ordinary assessable income, declared the same way as the rent or profit it is replacing. A payout for the building itself is different again: it triggers a capital gains tax event, but if you use the money to repair or rebuild, a rollover is generally available that lets you defer some or all of that gain rather than pay it immediately. Get the timing or the entity structure wrong here and the tax outcome can move materially.
We are not going to pretend this page can tell you what your specific payout means for your specific tax return, because it can't, and anyone who tells you otherwise without knowing your numbers is guessing. Before you decide what to do with a significant insurance payout, especially whether and when to rebuild, talk to your accountant. What we can do as your broker is make sure the payout is the right size in the first place; what happens to it on your tax return from there is genuinely their job, not ours.
Frequently asked questions
Is stamp duty on my insurance premium tax deductible?
Stamp duty is added to most Australian insurance premiums on top of the base premium and GST (see our glossary entry on stamp duty for what it is). The reasonable expectation is that it is treated the same way as the premium it is attached to, but the ATO's own published guidance doesn't spell this out in as many words. If you want certainty rather than a reasonable expectation, this is worth a specific check with your accountant rather than assuming it from this page.
Can I claim insurance for a commercial property held in a trust or company?
Generally yes, the underlying deduction works the same way for a trust or a company as it does for an individual. Where it can genuinely differ is the timing question above: a passive corporate or trust landlord that isn't carrying on a business and doesn't qualify as a small business entity may not get the immediate 12-month deduction other owners do. Confirm which rule applies to your structure with your accountant before assuming the timing is the same as it would be in your own name.
Do I pay GST on an insurance payout for my destroyed building?
Generally no, provided you correctly told your insurer your GST registration status and entitlement when you took out the policy, as covered in "The GST trap" above. If you didn't, or you understated it, GST can apply to part of the payout. This is a separate question from the income-tax treatment of the payout covered in "Do I pay tax if my claim gets paid out"; the two run alongside each other, not instead of each other.
Does my commercial property insurance premium need to be split if it's held in a self-managed super fund?
It can, but for a fund-specific reason that has nothing to do with business or private use. If your SMSF has both accumulation-phase and pension-phase members, the fund may need to apportion the deduction between the two, on top of the ordinary rules that apply to everyone else. This is a genuinely separate mechanism from the mixed-use apportionment covered above, so don't assume the same split logic applies. Your fund's accountant or administrator is the right person to work out the actual percentage.
Get the cover right, then talk to your accountant about the rest
This page can tell you how insurance is generally treated for tax. It can't tell you whether your own commercial building, contents and liability cover is actually the right cover for what you would need to rebuild or keep trading. That part is ours to get right.
What the cover itself includes is set out on commercial property insurance.