Break Fees

[m-dot]

Hi there.

I wish I had known about this forum a long time ago!

I have tried looking for info using the search funnction but have come up stumps.

Earlier in 09 I paid out the break fees assosciated with a high fixed interest rate. I am wondering about the deductability of the amount (quite a reasonable cost). With respect to the deductability I am wondering if anyone can help me with answers to ;

1. What amount of that can I expect to get back from the ATO? (i.e. what tax rate is it calculated on? My PAYG rate or the rate caulculated for me with the ITWV I have in place))

2. Over what period can the deductions be made?

Thanks for anyone's help.

Regards

m-dot

 

[Pushka]

My understanding is that break fees are a direct deduction and are made within the same financial year.

 

[Rob Williams]

This has been discussed previously. Do a search to see if you can find the thread.
In a nutshell, the breakcosts are deductable in the year incurred. There is an ATO ruling on this TR 93/7, I think.

 

[clk0]

Thanks, I found it on ATO website, this is the link

http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR937/NAT/ATO/00001

Cheers
Jas

 

[m-dot]

Thanks people. I am a little shy on the mathematics though.

If the whole amount is deductable, how would I calculate the percentage of the break fee I will get back?

Thanks for your help in advance.

 

[Ms Jade]

The amount of the break fee will be deducted from your taxable income. The only way to calculate it is to subtract the break fee from the income declared on your ITWV. This will be your new taxable income. Then you need to have a look at the ATO tax withholding tables to see what the tax rate is.

 

[m-dot]

So let me get this right. My ITWV income less the break fee leaves me at an income of $14k. Therefore the ATO should give me almost all the tax back that I paid in the last year?

 

[Pushka]

OK, income + interest + dividends + rent + any other income - breakfee - deductions - depreciation etc = $X

Look at the tax payable for $X dollars; add medicare and you will get the excess tax back you paid, or have to pay an amount if you did not pay enough.