Wouldn’t it be great if you didn’t have to wait for your tax refund? With this little-known trick, it’s possible.
Investors who own negatively-geared properties will understand that it can sometimes be an agonising wait for your tax refund.
You’ve scrimped and saved all year to invest for your future, and finally the taxman rewards you with a big fat cheque.
While some people like the idea of getting an annual tax refund, it doesn’t really make financial sense. By paying more tax than necessary, the tax office is essentially ‘holding’ your money.
Wouldn’t you rather have the money in your pocket from day-one to do as you please? You could pay off your mortgage sooner, or maybe buy another investment property.
Well, it’s possible to get your refund as part of your regular salary payment using a feature of our Pay-as-you-go (PAYG) withholding system.It involves submitting what is called a PAYG variation.
This is basically an application telling the Australian Tax Office how much of a loss you expect to make on your investments, so that you only have to pay tax on the adjusted amount.
Once approved, your employer will reduce the amount of tax withheld from your pay to reflect your anticipated deductions (such as interest payments and depreciation), which could easily add a few hundred dollars to your pay packet.
Strangely, many investors don’t know about this strategy, but it can really make a difference to your cash flow.
To find out more about a PAYG variation, it’s best to talk to your accountant.