As a property investor are you expecting a tax refund due to a negatively geared investment property? Did you know you can access that refund in advance, or in real time during the financial year to improve your cash flow each month?
The ATO allows investors who are making a net loss on a property to vary the tax withheld from their salary/wages each pay, rather than waiting until after June 30 when your income tax return is processed. The reason many investors do this is to improve their cash flow during the year. More cash flow enables investors to pay down debt, reinvest, or simply makes the month to month commitments of holding the property more manageable.
As an example, consider Steph, who purchases an investment property in July 2017. Based on the calculations Steph has done with her accountant, she is forecasting that the property will make a net loss of $9,000 per annum (once her expenses including depreciation are deducted from her rental income). Steph's accountant calculates that this would result in a $3,000 refund to Steph at the end of the financial year. Steph and her accountant could decide to submit a PAYG income tax withholding variation (ITWV) application to the ATO. The ATO would then advise Steph's employer to vary the PAYG tax deducted from her pay. Steph is paid fortnightly by her employer who will now reduce the tax deducted from her pay by $115.00 per fortnight. That gives Steph an extra $230.00 per month, which she chooses to pay towards the mortgage for that property, helping her to pay it down sooner, and use the equity created to continue to grow her portfolio.
For more information about varying your PAYG, speak with your accountant, or see what the ATO has to say here.
Contact our friendly team to discuss your property and find out what depreciation deductions are available to you. We provide free, all inclusive quotes and estimates of deductions up-front so you can feel confident before proceeding. Get in touch today on 1300 922 220.
Capital Claims Tax Depreciation are quantity surveyors and rental property depreciation specialists. We assist investors Australia-wide from our offices in in Sydney, Brisbane, Melbourne, Perth, Hobart, Canberra, Newcastle.
Mark is an expert quantity surveyor, business owner, public speaker and property developer. With 20+ years experience in the construction and quantity surveying industry Mark’s specialist expertise have been sought in consultant capacity by professional bodies such as the National Institute of Accountants and the National Tax and Accountants Association, and he has presented at various property and tax seminars and expos nationwide. Mark holds a Bachelor of Construction Management from the University of Newcastle, is an affiliate member of the Australian Institute of Quantity Surveyors and a Registered Tax Agent.View all posts by Mark Wilkins