Think about almost every tax deduction.
We patiently wait until June 30 for our group certificate, submit our tax return, and eagerly await our refund.
While this approach suits most people, often it creates cash flow barriers for property investors as their pending tax breaks are so big they can’t afford to wait until the end of the financial year.
For many investors, tax breaks make it affordable to own an investment property in the first place and that’s where the ‘PAYG Withholding Variation’ comes into action – a variation which allows you to receive your tax breaks every time you get paid!
How does it work? Let’s look at an example.
Negative gearing occurs when the cost of owning a rental property outweighs the income it generates each year. This creates a taxable loss, which can normally be offset against other income including your wage or salary, to provide tax savings.
You might be wondering, If negative gearing results in a loss – why do it?
While making a loss on an investment property or shares might initially seem counterintuitive, some investors are willing to do this with the expectation that the capital gain when they sell the asset will more than offset that loss. Some might also find themselves in an unforeseen position of loss if they incur higher expenses or lower returns than anticipated.
Only 50 per cent of the increase in the value of the asset (when it is sold) is subject to income tax, providing it has been owned for more than 12 months.
So, what are the benefits of negative gearing?
Take Sam for example. Sam owns a rental property that generates $20,800 of rental income each year, but the cost of holding the property including mortgage interest, amounts to $25,800. This gives Sam a taxable loss of $5,000, which he can use to reduce the tax payable on his salary.
If investors are aware of this tax benefit, they can reach out to their representative to AllianceCorp who will lodge a ‘PAYG Withholding Variation’ to reduce the amount of tax taken out of their salary (almost immediately!) and use it to boost personal cash flows – it’s that easy!
- Step 1: Simply fill out the expression of interest below to lodge a PAYG Tax Variation
- Step 2: Once received, a member from our partner company Ethical Advisory will contact you seeking the relevant details necessary to put forward a variation request
- Step 3: Ethical Advisory will submit the completed variation on your behalf to the Australian Taxation Office
- Step 4: Within a 2 week turnaround, your PAYG Tax Variation will be reviewed and approved
- Step 5: Share this with your employer, and watch it take effect from your next pay cycle!
Alternatively, If you are a prospective investor and are interested in reducing your taxes to almost zero through property investment – CLICK HERE to request a no-obligation, 90-minute strategy session with one of our esteemed Senior Property Wealth Planners valued at $495 for FREE.