221D

[WebBoard]

From: Mike .


Tax Problem: 221D - Not useful
From: David P
Date: 20 Dec 2000
Time: 10:42:17

Hi All, I wonder if anyone has some suggestions on this. My father has two properties, and so he should have been able to use the 221D to adjust his tax. However he also has a bussiness but its NOT a company structure so the income from it basically goes onto his income. It doesn't pay tax during the year so he has lump sum payment at the end of each tax year.

The accountant decided that it was no use for him to use the 221D form. The properties are brand new so there is good depreciation to use which would reduce his tax, but he is not getting any advantage right now.

Is the accountant correct? I was thinking maybe there has to be a better structure to use. I know there has been a lot of talk of companies on the forum. Is it worth researching trusts/companies and seperate the business from his personal tax.

Any suggestions welcome.

David

 

[WebBoard]

Anna

Reply: 1
From: Mike .


Re: Tax Problem: 221D - Not useful
From: Anna
Date: 20 Dec 2000
Time: 15:46:39

Your father gets to hang onto his tax throughout the year? It doesn't get any better than that! This form is to REDUCE the amount of tax through the tax year rather than waiting for a refund at the end. Your father does not pay any tax during the year so his tax cannot therefore be reduced. The accountant should be able to take his properties into account to reduce the tax payment amount due end of the year.

If he set up a Pty Ltd he would pay himself a salary and could gain tax deductions throughout the year but the fact is that he would need to be paying the tax throughout the year. I can't see how this would be an improvement.

 

[WebBoard]

Gary

Reply: 1.1
From: Mike .


Re: Tax Problem: 221D - Not useful
From: Gary
Date: 21 Dec 2000
Time: 21:14:48

Sounds like what the accontant is saying is that the tax he will get back from depreciation will be be less than the tax he is required to pay on the business. If that is the case i.e at the end of the year he owes tax to the ATO then he can't use 221D to reduce his other PAYE tax. If he gets a refund at the end of the year, then he should be able to use one. Sounds like he can't though.

As for a compnay, that depends on how much PAYE tax he pays, how much profit the business and investments make, and most importantly, whether he wants/needs that money for spending, or if he wants to invest it. If he wants to spend the money then there is no point on a company/trust (from a tax viewpoint anyway). If he wants to invest it then a company/trust would be useful.

Gary

 

[WebBoard]

David P

Reply: 1.1.1
From: Mike .


Re: Tax Problem: 221D - Not useful
From: David P
Date: 21 Dec 2000
Time: 09:06:19

That is correct, he will have his tax adjusted at the end of the year. Holding onto the tax isn't that good because you must keep enough to pay the tax bill which you don't know what the amount is, so it does tie up a fair amount of money too.

David

 

[WebBoard]

NigelW

Reply: 1.1.1.1
From: Mike .


Re: Tax Problem: 221D - Not useful
From: NigelW
Date: 21 Dec 2000
Time: 09:58:40

Also remember the Robert Kiyosaki comment to pay yourself first and everyone else last. From the date of the assessment issuing you can probably stall the ATO for at least a month if not much more... if you've got a PAYG income then you will have saved the balance to pay it off in the interim...

I guess at the end of the day its ALL about cashflow management. - Hence my new thread question about the time value of money...

Cheers N.