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Thank you for your reply. As @RochL advised it is not deemed as interest and only increased to keep inline with CPI. As such indexation is not deductible. The website also advises -
Specific expenses you can't claim. You can't claim a tax deduction for the following expenses:
Hope this helps.
In the link to the ATO's website it provides the folloiwng example:
Example: interest on borrowings
Tim is a solicitor undertaking a Master of Law degree part-time. He borrowed $10,000, repayable over three years, to pay for his tuition fees and incurs $1,000 interest each year. Tim is entitled to claim a deduction for interest in each of the three years.
What's the difference between the two? Indexation in line with CPI is interest, pegged at the prevailing rate of CPI.
Thank you for your reply. It is deemed Consumer price index (indexation) not interest otherwise it would be referred to as such. Interest rates are set by the reserve bank and individual banks set their rates accordingly. Consumer Price Index is set in line with the cost of living and published by the Australian Bureau of Statistics. Indexation is applied to HELP/TSL debts once a year on June 1. It is a once a year adjustment to sit in line with the cost of living. If the debt is zero on June 1 or has been on our systems less then 11mnths, no indexation is applied.
Interest like GIC is different because generally it accrues daily, this interest is applied to other debts individuals hold with us, e.g. income tax debt. Indexation is not the same as interest, nor is it deductible.
Hope this helps.
Thank you for your reply. Unfortunately we cannot change this as we only administer the legislation, it is deemed indexation, not interest. If you wanted to take it up with your local MP or write in to our early engagement team or for a Private ruling you can.
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