PAYG Income Tax Withholding Variation

Do you own a negatively geared investment property?

Your employer is required to withhold tax during the year to cover your estimated tax liability from your employment income. However, those who have a negatively geared property investment will have less taxable income than their employer estimated, due to their rental property loss offsetting their employment income. In these cases, the employee does their tax and gets a tax refund for the overpaid tax at the end of the year.

Have less tax withheld from your pay

Many people like to get a big tax refund at year end, but why wait for your refund? Why not get it now? The ATO allows you to do just that.

You can lodge a Pay As You Go (PAYG) Withholding Variation, which if accepted, will direct your employer to withhold less tax from your pay and give more cash to you during the year. This is an efficient tax strategy that can free up extra cash sooner to reduce debt, put into your offset account or re-invest.

In particular, people who have several properties which are significantly negatively geared may find it difficult to make ends meet if they don’t use a strategy such as this to manage their cashflow.

Get your figures right

The only trap is that you need to be accurate in your variation estimate otherwise you may have to pay penalty interest on the extra tax that you kept from the ATO. An accurate estimate can be made using your current rental return, current interest rate and estimated expenses combined with advice from your accountant.

Speak to your accountant

If you want to submit a PAYG Variation or discuss the suitability of this option, call the office 03 8393 1000 and speak to one of our accountants, they will be more than happy to assist you.

Rebecca Mackie, Partner, Paris Financial

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