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Penalty interest deductibles

The ATO has recently replaced the Taxation Ruling (TR) 93/7W on whether penalty interest is deductible to the new TR 2019/2. This new ruling highlights the circumstances in which penalty interest is deductible and the situations where it is not.

“Penalty interest” refers to an amount charged by a lender to a borrower under a loan agreement if instalments are not paid. The payable amount is then calculated by reference to a number of months of interest that would have been received.

TR 2019/2 says that penalty interest is generally deductible under section 8-1 where:

Penalty interest that is incurred to discharge a mortgage is also deductible under section 25-30, to the extent that borrowed funds were used to produce assessable income. The ATO makes a note that unlike the general deduction provisions, there’s no influence from the expense being capital or revenue in nature.

You cannot deduct a loss or outgoing under section 8-1(2) to the extent that:

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News

Proposed measures to increase retirement savings 

December 11, 2019

Currently, people aged 65 to 74 can only make voluntary superannuation contributions if they meet the ‘work test.’ This means they must report themselves to be working a minimum of 40 hours over a 30 day period within the financial year to qualify.

The government has proposed that from 1 July 2020, individuals aged 65 and 66 will be able to make voluntary concessional and non-concessional superannuation contributions without meeting the work test. This approach will enable participants nearing retirement to increase their superannuation savings regardless of their working arrangements.

As well as this, the government also proposes to increase the age limit for receiving spouse contributions from 70 to 74, to be implemented on 1 July 2020. Currently, people aged 70 and over cannot receive any contributions made by another person on their behalf, and the change will give older Australians greater flexibility to save for their retirement.