Monday, 25 July 2011

PAYG Variations - Extra Money in Your Pocket Weekly!

PAYG Variations - Extra Money in Your Pocket Weekly!

An often overlooked way in which Investors can improve their weekly cash flow is through a pay as you go (PAYG) variation. The PAYG system is a method of tax collection that was introduced in July 2000 to replace previous versions of the same system, such as pay as you earn (PAYE).

PAYG instalments are a system for paying instalments towards your expected tax liability on your business and investment income for the current income year. A PAYG variation is an application to the ATO requesting that your employer reduce your weekly/fortnightly tax payments to reflect set deductions like depreciation on a rental property. In essence it is a way of decreasing the amount of tax you pay each fortnight to help with your week to week cash flow. Rather than a tax return at the end of the financial year, it is equivalent to receiving small portions of your return each week.

The flexibility this gives the Investor, combined with depreciation deductions identified by your Quantity Surveyor, can be of great help in managing investments and mortgage repayments.

Let's consider a hypothetical situation;

You have just purchased an investment property. If you were to take your potential tax return, including the extra deductions gained from your investment property, and divide it by 52 weeks, this would give you the approximate amount your tax is reduced by per week - creating the extra cash flow.

A Quantity Surveyor makes it even easier for you when you consider the extra tax deductions they are able to identify for an investment property. Talk to your accountant about PAYG variations and increase your weekly cash flow!

Article Provided by BMT Tax Depreciation Pty Ltd. Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is a Director of BMT Tax Depreciation.

also from wealth farm:

Pay As You Go Variations - Extra money in your pocket every week!

Written on the 28th of April 2010 by Luke Glasgow
The following provides some preliminary information regarding applying for PAYG Variation as a result of investment in Australian residential rental property by Australian residents under the Australian taxation laws.

This advice is of a general nature and you should seek independant professional advice before acting on any of this information.
Sometimes the expenses associated with holding a rental property (e.g. Interest, repairs, insurances, rates,depreciation etc) are greater than the rental income received from the property. This scenario generates a tax loss and is called negative gearing. Where an individual tax payer incurs a negative gearing loss they may apply to have their PAYG instalments reduced, so the out-of-pocket costs of holding the property are reduced.
This entails:
•calculating your projected annual assessable income from wages, interest, dividends, rental property rent and any other assessable sources, and
•calculating your projected annual allowable deductions for work related expenses, interest and dividend expenses, rental property expenses including borrowing costs and depreciation claims and any other allowable deduction, and
•reporting the above to the Australian Taxation Office in the prescribed form.
It is very important that the calculation of the projected taxable income reduction be accurate, otherwise the Australian Taxation Office will penalise the taxpayer for lodging an incorrect variation. Similarly, it is very important that the Australian Taxation Office be advised of any change of taxpayer income or expenses which may have occurred after lodging the Application for Variation of PAYG Withholding so that penalties do not apply. It is for these reasons that we recommend you engage a qualified professional to assist in the preparation of the Application for Variation of PAYG Withholding.

Where a resident individual makes a rental property loss for Australian income tax purposes, this loss may be offset against other Australian sourced income. Accordingly the benefit of the income tax reduction will depend on what marginal income tax rate the taxpayer is currently paying based on other assessable income less allowable deductions. If there is no other taxable income to absorb these losses, then the rental losses may carry forward to be offset against future taxable income.
The PAYG variation period ends each 30 June. Accordingly your first application will most likely be for a part-financial-year. Each year thereafter, your application will cover the coming full-financial-year commencing 1 July and ending 30 June. In the first year, you need to lodge your application for PAYG variation either shortly after settling on the property acquisition or shortly before commencing to rent the investment property depending on your specific circumstances.
In the second year and each year thereafter, prepare your application for PAYG variation in April, to lodge with the Australian Taxation Office in May, with the commencement date for reduction from your salary being 1 July.
Once you have lodged the application with the Australian Taxation Office and it has been processed, the Australian Taxation Office will advise your employer of the new varied % tax rate at which to deduct PAYG withholding tax from your gross salary. The Australian Taxation Office will also advise you of this new varied % tax rate.  You should budget for a delay of 28 days from date of lodgement to date of ATO advice to your employer of the new % tax rate.
In order to assist you in preparing an Application for PAYG Variation your accountant will ask you for the following information relating to the financial year for which they are preparing the variation:
•Copies of your two latest payslips
•Estimate of your annual wages, overtime or other benefits your are paid/receive by your employer
•Details of your investment income and deductions (interest, dividend income)
•Details of the weekly rental income you will receive from your investment rental property (your rental agent will be able to assist us in this regard)
•Your accountant will discuss the rental expenses you may claim against your rental income (your real estate agent or solicitor will be able to assist your accountant in relation to some of these matters which will be documented during the property contract and conveyancing process)
•Details of any other income or expenses which will be included in your Australian income tax return
Wealthfarm Accountants are able to assist you with PAYG Variation. If you require further information or assistance, please call us on 1800 WORK IT or email


One way in which a property investor can improve their cashflow is by lodging a PAYG variation. A PAYG variation is an application to the ATO requesting that your employer reduce the amount of tax withheld from your regular salary or wage payments, to reflect the expected rental loss from your investment property.
This is effectively a way of reducing the amount of tax you pay each payroll cycle, rather than receiving a large lump sum refund at the end of the financial year, and can be a great help in making mortgage repayments.
If you own an investment property, speak to your accountant about making a PAYG variation.


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