How property investors can use a PAYG withholding variation

A series of sheets and a calculator

A PAYG withholding variation can help boost your investment property cash flow.

It’s always nice to get a tax refund at the end of the year, but it can be tough waiting for that money to come through. That’s particularly true if you own an investment property and have to bear the expenses that come along with it. This is where a PAYG withholding variation can be a great strategy.

What is a PAYG withholding variation?

Throughout the year, your employer withholds a part of your income to pay your tax debt. At the end of the year, your tax return helps determine whether your employer has correctly estimated your tax liability for the year. If they’ve underestimated your tax liability, you’ll end up owing money to the Australian Taxation Office (ATO). If they’ve overestimated it, you’ll end up with a refund.

The tax withheld from your PAYG income is often an overestimation of your tax liability. This is because your employer doesn’t know all the deductions you’re eligible to claim. If you’re a property investor, there are a number of deductions you can claim that will significantly boost your tax refund at the end of the year.

A PAYG withholding variation allows you to reduce the amount of tax being withheld from your pay in order to better reflect these deductions. It’s basically like getting your tax refund early in the form of higher take-home pay.

Why would I use a PAYG withholding variation?

A PAYG withholding variation can help boost your cash flow as a property investor. This can be important given the cost of holding and maintaining an investment property.

As a property investor, you’ll run into a variety of expenses. In addition to your home loan repayment, you’ll also have expenses for maintenance, repairs, property management fees, insurance and council rates. Fortunately, you can deduct all these expenses, along with the interest charges on your home loan. You can also use the depreciation of the building and any items you’ve purchased for the property to further boost your deductions.

All these deductions can add up to a hefty tax refund. However, if you wait until the end of the year for your tax refund, you could run into some serious cash flow problems.

Your income from an investment property is usually limited to the rent you collect, any water usage charges passed on to your tenants and any insurance claims that are paid out during the tax year. Your expenses can often exceed this income. If you’re in a situation where the expense of holding and maintaining your investment property is greater than the income it generates, your property is said to be negatively geared.

Fortunately for property investors, negative gearing tax rules dictate that you can deduct any loss you realise on an investment property from your personal income. You can either do that by filing your return at the end of the year and waiting for a refund, or you can apply for a PAYG withholding variation and see tax benefits right away.

Because you’re likely to have a significant amount of deductions, your employer is likely to overestimate your tax liability. By applying for a PAYG withholding variation, you can reduce the amount withheld, boost your take home pay and help ease the financial burden of owning your investment property.

How to maximise your tax return as a property investor

How do I set up a PAYG withholding variation?

You can apply for a PAYG withholding variation directly with the ATO here. You can either fill out an electronic form and submit it online or print the form, fill it out and mail it to the ATO.

However, before you apply, you should discuss your situation with an accountant. Remember, if you overestimate the amount of deductions you’ll be able to claim, you’ll end the tax year on the hook for a debt to the ATO. A property tax specialist can help you figure out exactly how big a variation to apply for.

You’ll also want to speak to a depreciation specialist. A depreciation schedule can give a serious boost to your deductions, so it’s worth having one prepared before you chat to your accountant.

Property investment is usually a long-term strategy that involves holding a property for a number of years to build up capital growth. PAYG withholding variations allow you to pursue this strategy in the long-term without being too much out of pocket over the short term.

Start your property investment dreams with an investment home loan

Rates last updated May 20th, 2018
$
Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.99%
3.99%
$0
$0 p.a.
80%
Refinance to this loan and you could get $1,000 in your USaver account (offer conditions apply). Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.88%
3.88%
$0
$0 p.a.
70%
You'll need at least a 30% deposit to get this low investor rate. 100% online application process.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
4.15%
4.76%
$600
$0 p.a.
90%
A competitive rate with no ongoing fee and borrow up to 90% LVR.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.50%
4.82%
$600
$0 p.a.
90%
A variable interest-only loan to fund your investment. Get this loan with a 10% deposit.
4.09%
5.28%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.93%
$0
$0 p.a.
95%
A low deposit investment loan with a discounted, competitive rate from one of the big 4 banks.
4.19%
5.49%
$600
$8 monthly ($96 p.a.)
90%
Lock in your investment repayments for 3 years with one of the big 4 banks. Available with a 5% deposit.
3.99%
4.02%
$0
$0 p.a.
80%
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
4.65%
4.69%
$600
$8 monthly ($96 p.a.)
90%
You can get this variable investment product with a 10% deposit. The loan has limited fees.
4.55%
5.39%
$499
$0 p.a.
95%
Fix your investment mortgage repayments for 3 years. Available for investors with just a 5% deposit.
4.29%
5.39%
$0
$395 p.a.
95%
Enjoy advantage package discounts on financial products on this investor mortgage. $1,500 cashback offered to refinancers. Conditions apply.
4.79%
5.44%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
A variable rate loan for investment. Suitable for customers borrowing $1 million or more to buy a property.
5.59%
$0
$395 p.a.
90%
Make interest-only repayments and unlock equity in your home. Combine your mortgage, credit card and transaction account for discounts.
5.79%
5.93%
$600
$8 monthly ($96 p.a.)
95%
Purchase an investment property with a variable rate mortgage from one of the big 4 banks. No settlement fee.
4.09%
5.46%
$0
$395 p.a.
90%
Get 5-15% discounts on insurance products with this package investment loan from CommBank. Available with a 10% deposit.
4.19%
5.47%
$0
$395 p.a.
95%
Fund your investment with a low deposit package loan from ANZ. Bundle your loan with credit card and bank account for discounts.
4.54%
4.85%
$0
$299 p.a.
80%
Borrow $1 million or more and maximise your investment strategy with this interest-only mortgage.
4.89%
5.50%
$0
$395 p.a.
95%
A low deposit package investment loan. Fix your rate and plan your repayments for years in advance.
4.39%
4.23%
$0
$198 p.a.
70%
Fund your property investment with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
4.24%
4.55%
$0
$299 p.a.
80%
A loan for investors borrowing $1 million or more. The product includes a 100% offset account.

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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Adam Smith

Adam has more than five years of experience writing about the Australian home loan market.

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