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Edited version of your written advice
Authorisation Number: 1012693077128
You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf.
The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies.
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Ruling
Subject: Break fee
Question
Are you entitled to reduce your interest income for the 2012-13 financial year by the amount of the break fee?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
01 July 2012
Relevant facts
You entered into term deposits with the bank.
In the 2013-14 financial year you closed some of the accounts early and as a result, incurred a break fee which was a percentage of the interest already earned in a previous financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 59-30(1)
Reasons for decision
Subsection 59-30(1) of the Income Tax Assessment Act 1997 states that an amount you receive is not assessable income, and is not exempt income, for an income year if:
• you must repay it; and
• you repay it in a later income year; and
• you cannot deduct the repayment for any income year.
In your case, you received interest in the 2012-13 financial year and as a result of closing the accounts early, you incurred a break fee which was a percentage reduction in the interest you had received. Therefore, as you have previously declared the interest income in the 2012-13 financial year, this income has been repaid and you cannot deduct the repayment in any income year, you are entitled to amend your assessment to exclude the break fee amount.