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 February 19th, 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%
4.02%
$0
$0 p.a.
80%
A loan with a special investment rate and an offset account.
3.89%
3.91%
$0
$0 p.a.
80%
Package your owner-occupied loan with your investment loan and enjoy low rates for both.
3.99%
3.99%
$0
$0 p.a.
80%
Investors can take advantage of a discounted standard variable rate.
3.88%
3.88%
$0
$0 p.a.
70%
A competitive investment loan with a low rate that requires a 30% deposit.
3.99%
4.00%
$0
$0 p.a.
80%
A low-fee variable rate investor loan with a fast online application process.
4.19%
4.21%
$0
$0 p.a.
80%
Pay no application fee on this low variable rate investment home loan.
3.99%
4.62%
$395
$0 p.a.
80%
Fix your interest rate and pay principal and interest repayments on your investment.
3.99%
4.02%
$0
$0 p.a.
80%
An investment loan with a competitive interest rate and no ongoing fees.
4.34%
4.87%
$0
$0 p.a.
80%
Lock in a low 2-year fixed rate with this interest-only investment loan.
4.14%
4.14%
$0
$0 p.a.
80%
An investment home loan with competitive rate and 100% offset account.
4.44%
5.37%
$0
$395 p.a.
90%
Lock in the interest rate on your investment purchase for 3 years and enjoy the benefits of a package home loan.
4.19%
4.59%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
4.11%
4.01%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate investment loan.
4.54%
5.58%
$600
$8 monthly ($96 p.a.)
95%
Get a competitive 3-year fixed rate to buy your next investment property.
4.39%
4.42%
$0
$0 p.a.
80%
An interest-only loan for investors. Access equity to further your investment opportunities.
4.29%
4.05%
$0
$0 p.a.
80%
This fixed rate investor loan has limited fees and flexible repayment options. 100% online application process.
4.79%
5.44%
$0
$395 p.a.
90%
Package your 4-year fixed rate investment loan and pay no application fees.
4.09%
4.11%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.55%
5.39%
$499
$0 p.a.
95%
Enjoy a competitive 3-year fixed rate with no ongoing fees.
4.29%
4.17%
$0
$0 p.a.
80%
Borrowers can borrow up to $750K with 2 years lock in rate for their investment property.
4.19%
5.37%
$0
$395 p.a.
95%
Plan ahead by locking in your rate for 3-years on this investor loan. $1,500 cash back available for refinancers. Conditions apply.
4.65%
4.69%
$600
$8 monthly ($96 p.a.)
90%
Save on a no-frills home loan that offers a competitive rate without the bells and whistles.
4.29%
4.31%
$0
$0 p.a.
80%
A Simplifier Home Loan with no application fee or ongoing fee.
5.59%
$0
$395 p.a.
90%
Package your home equity loan to save on rates and fees.
5.79%
5.93%
$600
$8 monthly ($96 p.a.)
95%
A competitive rate to help you purchase your next investment property.
4.44%
5.53%
$0
$395 p.a.
90%
Enjoy a 2-year fixed rate with no establishment fees or annual credit card fees, all for an annual package fee of $395.
4.39%
5.51%
$0
$395 p.a.
95%
A competitive 2-year fixed rate to help you invest in property.
4.64%
4.95%
$0
$299 p.a.
80%
A loan with no application fee.
4.59%
5.37%
$0
$395 p.a.
95%
Enjoy the stability of an investment home loan rate locked in for 5 years.
4.39%
4.70%
$0
$198 p.a.
90%
4.24%
4.55%
$0
$299 p.a.
80%
A loan with no application fee and borrow up to 80% LVR.

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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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