I think its a Section 15 or NAT 2036 Form ATO

[sarchibald1979]

Gday everyone !
Well i have been loking into IP's and purchased my first one about 13 months ago and am now looking into a second. Does anybody use this form from the ATO and if so does anybody have any info on how to use them. ie is it better for the accountant to fill them out, how did you go about your estimates etc.
Just any light on the subject would be great

Thanks Steve

 

[Tasman]

Hi Steve,
Here is a link to the ATO PAYG Income Tax Witholding Variation form which you can fill out online, save on your computer as you progress through the form, and return via internet to ATO:

http://www.ato.gov.au/individuals/content.asp?doc=/content/57470.htm

Why would you get an accountant to fill out the paper version? It has a much slower turn around time with ATO, and costs money. You would still have to do the ground work to provide the source information such as salary, rent income and IP expenses that are required on the form.

Also, see my last paragraph on accuracy, as it is a forward estimate rather than actual claim to ATO, need for an accountants verification is not critical. In my case an accountant does tax returns, but I prepare and submit the ITWV forms to ATO.

If you have submitted last years tax return successfully(and you can't put in a ITWV for this financial year without being up to date on previous tax years), you can refer to this for guidance for previous rent, expenses and depreciation you incurred on your property. However you need to look at your current rents, IP expenses and report by quantity surveyor for depreciation allowances.

The form is almost identical to the standard tax return form, except the important difference is, it is only a forward estimate of income and expenses, so don't get hung up on predicting with 100% accuracy, 95% plus would be good.

Cheers

 

[sarchibald1979]

Hey thanks TASMAN your information has been great
just looking into it now
Thank Alot

sarchibald1979

 

[Rixter]

Gday everyone !
Well i have been loking into IP's and purchased my first one about 13 months ago and am now looking into a second. Does anybody use this form from the ATO and if so does anybody have any info on how to use them. ie is it better for the accountant to fill them out, how did you go about your estimates etc.
Just any light on the subject would be great

Thanks Steve

Steve,

Ive been using a ITWV each year for a few years now. Its a great tool for maximising my cashflows across my portfolio. Why use your own money to fund or carry your holding costings which had to come from somewhere like your lifestyle budget, when you can use the tenants & the tax mans instead. The tax man doesn't pay you interest for them to hold onto money thats rightfully yours throughout the year until such time as you claim it back, so you might as well get it back straight away & have it working more effiiciently in your favour. IMHO it just makes sense.

My HR paymaster deposits my ITWV via my wages, and my PM's deposit my monthly rental incomes directly into one of my LOC's which provides me my cashflow saftey buffer - sort of like a overdraft facility except with equity funds already approved.

You can lodge it electronically at the ato website or print out a pdf hard copy and post it off snail mail to the ato.

You need to have your application into the ato by May 15th each year in order for them to process it and advise your paymaster to have it all set up by the start of the new financial year. You can update it as many times as wish if your incomes & expenses change dramatically throughout the year.

Obviously its best to use conservative figures when filling out your application. Most of your rental incomes & expenses you can fairly well predict - its mainly your repairs that will be an unknown quantity. Best allow a small amount here if any at all to be on the safe side.

Hope this helps.

 

[asdf]

Hey Rixter, have you had any issues with owing the ATO money cos you've overclaimed? Is it true that they will charge you penalty interest? That will be right! Keep our refunds for a year but charge us if we've overclaimed.

How about when you've sold an asset in the FY? Theoretically your circumstances have changed and thus should submit another form but if your CGs are large, no amount of PAYG withholding tax will be sufficient to cover the CGT so you'll end up owing them money anyway. Do they take that into consideration too? Interested to hear your experience on this (or anyone elses).

Thanks in advance

 

[Mry]

If you overclaim deductions in your estimate, you will be charged a penalty and in most cases unable to submit an estimate for the next year.

 

[sarchibald1979]

So basically you should claim all the things you know you are going to have to frk out for ie. Property management fees, Interest on the loan, coucil fees things like that is that right. I am trying to fill out the form and its a little confusing

Thanks Steve

 

[Tasman]

If you overclaim deductions in your estimate, you will be charged a penalty and in most cases unable to submit an estimate for the next year.

Mry
The ITWV is only a forward estimate of your taxable position, and the ITWV has not the same financial and legal obligations as your end of year taxation return, which you verify to be true and accurate. So on what basis would the ATO financially penalize a forward estimate?

There must be flexibility in estimates; otherwise they could not be characterized as estimates. However I agree, if you under estimate your tax liability (by more than 10% my accountant suggests) the ATO may not allow you to use the ITWV form in the next financial year, unless you have a very good explanation.

Steve
Basically you fill the form as you would do a tax return, except the items are based on previous years and your expectations of future events, thus you cannot be 100%.

This accuracy thing means you do not need to account for every tiny item, but summarize your expenses into the major groups as accurately as possible. If you are going to be an IP investor you really need to keep track of your expenses, then the ITWV form should not be too much trouble.


Cheers

 

[Mry]

The ITWV is only a forward estimate of your taxable position, and the ITWV has not the same financial and legal obligations as your end of year taxation return, which you verify to be true and accurate. So on what basis would the ATO financially penalize a forward estimate?

That you took too much money during the year from the ATO than you should have. Plus that you should be monitoring your tax position for the year and make adjustments or reassess the withholding again through another submission to ensure you don't take too much.

Some clients get me to do a 'mini-return' to ensure that their taxable income estimates are ok, and I advise them if they should adjust their withholdings based on my calculations.

 

[geoffw]

There must be flexibility in estimates; otherwise they could not be characterized as estimates. However I agree, if you under estimate your tax liability (by more than 10% my accountant suggests) the ATO may not allow you to use the ITWV form in the next financial year, unless you have a very good explanation.

It used to be the case that I could vary estimates through the tax year. If circumstances changed drastically (which was my main worry when I was considering this) then a revised estimate could be submitted.

Cynically, I guess my accountant would suggest this, as each revised estimate earned him income

 

[Tasman]

That you took too much money during the year from the ATO than you should have. Plus that you should be monitoring your tax position for the year and make adjustments or reassess the withholding again through another submission to ensure you don't take too much.

Mry,
How much is too much money? In your original statement it came across as any over estimate of deductions would be penalised, which is what I disagree with.

Geoff,
totally agree with you , and the strategy of submitting new ITWV's as your circumstances change.

Thus the online submission with fast turn around time is great, and cost is minimised if you do it yourself.

 

[Mry]

Mry,
In your original statement it came across as any over estimate of deductions would be penalised, which is what I disagree with.

By overestimating deductions, you receive the money during the year that should have gone to your tax bill, but didn't because your withholding rate is too low. Same thing. Your goal in making the declaration is get a small refund, you fail if you pay tax.

I'm not sure what the penalty is, but the most I have seen is $1,400.00

 

[Rixter]

Hey Rixter, have you had any issues with owing the ATO money cos you've overclaimed? Is it true that they will charge you penalty interest? That will be right! Keep our refunds for a year but charge us if we've overclaimed.

How about when you've sold an asset in the FY? Theoretically your circumstances have changed and thus should submit another form but if your CGs are large, no amount of PAYG withholding tax will be sufficient to cover the CGT so you'll end up owing them money anyway. Do they take that into consideration too? Interested to hear your experience on this (or anyone elses).

Thanks in advance

Asdf, No I have not had any issue with owing the ATO any money due to overclaims. Like I mentioned in my post its pretty easy to estimate all your fixed expenses (ie mortgage interest, insurances, rates etc, from the previous year ) & rental incomes. Its only really any unexpected repairs/maintenance thats the unknown quantity. If its a new or near new IP chances of any BIG ticket items requiring repairs are minimised. Its up you really - you can allow a small amount here if any at all to be on the safe side.

I believe that the ATO do charge a penalty for over claims tho like I said Ive always submitted my ITWV on the conservative side thus have not had any issues personally.

As my CGA strategy is a long term never sell strategy I have never sold any IPs. If or when you do have a change in your circumstances ( whether from selling or from your portfolio rental incomes and expenses) all you do is immediately up date you ITWV and submit to the ATO so things are not left for any extended period of time to blow out and create any possible end of year over claims issues.

In relation to selling and CGT thats a separate issue (not an incomes & expense issue) and best left to your accountant.

Hope I've answered your questions.

 

[sarchibald1979]

What great posts everyone I want to thank everyone again for all there input and I will be using the ITWV and will be adopting the never sell strategy also I really want to be comfortable when i retire

Steve

 

[MichaelW]

In case anyone is interested, the original link to the electronic form above is now out of date.

This link will take you to the page which then links to the current form. I plan on completing one of these shortly to reflect my increased deductions via my seriously negatively geared investment property.

Cheers,
Michael.

 

[poppy]

I am about to submit one of these forms and I'm a little confused.

My income from my payg job is very variable from month to month and is hard to estimate, however any extra income or deductions should all be at the 40% rate. I estimate my tax deductions at around $500 a month. I am paid monthly.

Will the variation then instruct my employer to reduce my taxable income by $500 a pay, then calculate the tax as per usual based on what is left OR - will the ATO instruct my employer to deduct a fixed amount of tax each month based on my estimated tax liability for the year / 12? If it is the fixed amount, that would leave me in a bad situation when I have a low pay month.

Thanks for any help.

 

[The Y-man]

Will the variation then instruct my employer to reduce my taxable income by $500 a pay, then calculate the tax as per usual based on what is left OR - will the ATO instruct my employer to deduct a fixed amount of tax each month based on my estimated tax liability for the year / 12? If it is the fixed amount, that would leave me in a bad situation when I have a low pay month.

Thanks for any help.

My understanding is that the witholding amount is a %age of your gross pay. It is the proportion you are varying - eg from 30% withheld to 20% withheld. On a low pay month, a different amount (but same proportion) should be withheld.

Cheers,

The Y-man

 

[Rixter]

I am about to submit one of these forms and I'm a little confused.

My income from my payg job is very variable from month to month and is hard to estimate, however any extra income or deductions should all be at the 40% rate. I estimate my tax deductions at around $500 a month. I am paid monthly.

Will the variation then instruct my employer to reduce my taxable income by $500 a pay, then calculate the tax as per usual based on what is left OR - will the ATO instruct my employer to deduct a fixed amount of tax each month based on my estimated tax liability for the year / 12? If it is the fixed amount, that would leave me in a bad situation when I have a low pay month.

Thanks for any help.

Poppy,

Y-man is correct. You submit your ITWV to the ato using your estimated "Annual" projection of you total income and expenses.

The ATO then calculate the percentage to be with held from your gross income and advice your paymaster so they can deduct this percentage each and every payday (ie weekly, fortnightly, monthly that you normally get paid) throughout the financial year.

If your incomes and expenses dramatically vary from your original projection then its best to advise the ATO so they can then recalculate and send an updated percentege to be withheld to your paymaster again in writing.

You can revise and up date as many times as you see necessary throughout the financial year.

Hope this helps Poppy.

 

[poppy]

Thanks for your help, that answers my question.

 

[oliver]

Hi,

If I fill the form now, will I get the new deduction in the next pay date when my employer receive the letter from ATO, right?

It doesn't matter if I under estimate the deduction (ATO still owns me money in next tax claim), right?

If my IP was settled in July, then I need to wait until 07/07 and after a tax claim on it before I can calculate it in my ITWV?

Thanks.