Owning an investment property can be a burden on your cash flow, especially when you have more than one property. With loan repayments, council and water rates, insurances, repairs and maintenance and property agent fees, many times the rent you receive will not cover these expenses. The real pressure is felt when interest rates rise or worse yet, a tenant moves out. The best way you can combat this pressure is to prepare a PAYG Withholding Tax Variation.
The PAYG Withholding Tax Variation has been known by many names, most notably a Section 221D and a 1515. It is highly possible that this was a deliberate tact from the Australian Taxation Office (ATO) to give it a technical name so property investors do not uncover the benefits! Effectively what a Variation does is vary your tax rate therefore providing you with additional cash flow with your periodic pay.
A PAYG Withholding Tax Variation application is effectively a forecast of your entire income and expenses for the upcoming financial year. By engaging your accountant’s services, they will calculate what your estimated taxable income will be and lodge the Variation with the ATO. The ATO will then inform you and your payroll office of what the varied tax rate will be. It is important to note that this process must happen each year, just as you do your tax return every year.
Presented by David Shaw from WSC Group. 12 April 2017.