How property investors can use a PAYG withholding variation

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

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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

Data indicated here is updated regularly
$
years
Name Product Interest Rate (p.a.) Comp. Rate^ Application Fee Ongoing Fees Max LVR Monthly Payment
Athena Variable Home  Loan
2.54%
2.54%
$0
$0 p.a.
60%
$596.91
Investors with large 40% deposits or equity can get this low variable rate. A competitive option for investors looking to refinance.
UBank UHomeLoan Variable Rate
2.74%
2.74%
$0
$0 p.a.
80%
$612.67
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
Athena Variable Home  Loan
2.64%
2.59%
$0
$0 p.a.
80%
$604.76
A competitive investor variable rate that falls as you build equity.
Well Home Loans Balanced Fixed Home Loan
2.36%
2.39%
$250
$0 p.a.
90%
$582.94
A competitive 3 year investor rate with principal and interest repayments. Optional offset account with a $10 monthly fee. Not available for construction purposes.
UBank UHomeLoan Fixed
2.14%
2.71%
$0
$0 p.a.
80%
$566.11
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Pepper Money Essential Prime Full Doc Home Loan
3.09%
3.29%
$599
$10 monthly ($120 p.a.)
80%
$640.79
This is a competitive, flexible variable rate suitable for borrowers with a good credit history. Borrow up to 80%.
Well Home Loans Balanced Variable
2.36%
2.39%
$250
$0 p.a.
80%
$582.94
If you're an investor with a 20% deposit saved you can get this low rate mortgage. Not available for construction.
Athena Variable Home  Loan
2.59%
2.56%
$0
$0 p.a.
70%
$600.83
Athena's refinance offer for investors and owner occupiers.
UBank UHomeLoan Fixed
2.09%
2.6%
$0
$0 p.a.
80%
$562.33
Pay no ongoing fees on this investment loan fixed for 3 years.
ING Orange Advantage Loan
2.74%
3.08%
$0
$299 p.a.
80%
$612.67
Investors can enjoy a 100% offset account, a redraw facility and flexible repayments.
Well Home Loans Balanced Variable
2.87%
2.9%
$250
$0 p.a.
90%
$623.03
Competitive variable investor mortgage to fund your property portfolio. You can add a 100% offset account for just $10 a month.Not available for construction purposes.
UBank UHomeLoan Variable Rate
3.14%
3.01%
$0
$0 p.a.
80%
$644.87
Pay interest only repayments with this special offer for investors.
Athena Variable Home  Loan
2.84%
2.68%
$0
$0 p.a.
80%
$620.63
A competitive interest-only investor rate with no application or ongoing fees. Requires a 20% deposit.
UBank UHomeLoan Fixed
2.29%
2.72%
$0
$0 p.a.
80%
$577.55
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
Pepper Money Essential Prime Alt Doc Home Loan
3.85%
4.04%
$599
$10 monthly ($120 p.a.)
55%
$704.25
A competitive rate home loan with an offset facility for self-employed borrowers.
UBank UHomeLoan Fixed
2.49%
2.67%
$0
$0 p.a.
80%
$593.01
Lock in a 5 year fixed rate on your investment loan and pay no ongoing fees.
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