Income Tax Withholding Variation query

Rob Williams

Rob Williams

I've never lodged one of these before. I've always preferred to get a nice big refund at the end off the financial year.
However, I'm looking to buy my fifth IP and cashflow is becoming an issue. I know I can use my refund in 2008 to help cover my negative gearing losses, but if I want to buy another IP before then, I will need some tax relief to help me fund it.
I'm curious to know if the majority of investors lodge an ITWV or wait until the end of the financial year to claim the tax back.
I'm also interested in the pros and cons from people who do and do not lodge ITWV.

Rob
 
I'm a big fan of the variation and used to use it when my income was predictable. The first time I lodged it took me about one hour online. I just saved the file and would amend it whenever rental income or interest rates changed. I would sometimes lodge several a year with my income tax rate dropping down to almost zero in the process.

Something to keep in mind is the time value of money. The $1 you pay in tax on July 1 of the new tax year won't be worth $1 when you get your refund after June 30 thanks to inflation.
 
I lodge an ITWV, i'd rather have the money sitting in my offset account instead of having to wait until i lodge my tax return to get it back.

Some people like to see the big 'tax refund' at the end of the Fy instead, but unless you can't really trust yourself not to spend the extra cash flow on non investment purposes during the year then i don't really see the benefit of waiting.
 
Yes, I have started claiming mine now too. I would rather have the money in my bank, than in the tax man's.
 
Because it takes me so long to get around to doing my tax (will rec $12K when I eventually do it this year) I figure $1000, or even $500 a month in my pocket is better than a loan to the ATO. Now, I've just got to get around to doing it. :)
 
Robwilliams590 said:
I've never lodged one of these before. I've always preferred to get a nice big refund at the end off the financial year.
However, I'm looking to buy my fifth IP and cashflow is becoming an issue. I know I can use my refund in 2008 to help cover my negative gearing losses, but if I want to buy another IP before then, I will need some tax relief to help me fund it.
I'm curious to know if the majority of investors lodge an ITWV or wait until the end of the financial year to claim the tax back.
I'm also interested in the pros and cons from people who do and do not lodge ITWV.

Rob
Click to expand...

Is the cashflow becoming an issue because of servicability with the Bank for a loan, or is it because the new IP will cause more neg cashflow?

If it is the latter, then why are you buying neg geared (I'm assuming it is)?

Look at buying a POSITIVE CASHFLOW AFTER TAX property.

This will result in money coming back into your pocket after all the costs, including loan interest, depreciation, tax return are factored in.

You can still do the witholding as well.
 
This will be our first financial year having IP's.

I am looking forward to the lump sum so we can just put it straight onto the PPoR none deductable loan!

If we get $10,000 back from hubbies tax that will save us about $72,000 in interest over the life of the loan and 3 years 9 months.
(Online calculator)
If we do that every year I will be very happy!
Also will help with the LVR too...
 
Sounds like I'm the only one who enjoys the element of suprise and gets excited about the big fat cheque each July. Maybe I need to grow up and get with the ITWV program. For me, tax time used to be like a second Christmas.
 
Robwilliams590 said:
Sounds like I'm the only one who enjoys the element of suprise and gets excited about the big fat cheque each July. Maybe I need to grow up and get with the ITWV program. For me, tax time used to be like a second Christmas.
Click to expand...

You're giving up the cashflow all during the year, and the interest on that. The excitement is more costly than you think.
Alex
 
Robwilliams590 said:
Sounds like I'm the only one who enjoys the element of suprise and gets excited about the big fat cheque each July. Maybe I need to grow up and get with the ITWV program. For me, tax time used to be like a second Christmas.
Click to expand...

For the past three years, I have done the same as you. Tax refunds in excess of $20k pa. This year, I had two tax refunds come at the same time, which was just in time for a deposit for a property that I purchased. :) My rationale was that it forced me to ensure my spending was not excessive during the year. In one way, it couldn't be because of the net cash outflows! However, I have changed tune this year, my return will be similar ~$22k, so I thought it is madness that ATO have an interest free loan. And more illogical that it isn't sitting in my offset account.

My variation starts from this month's pay (next few days actually), but as it is, I have only claimed ~75% of the amount that I could, as a buffer for the end of the year. Given that the variation starts in December, my refund at the end of the year, will still be over $10k.
 
Bit of a pain if you have income from other investments, eg shares, though, as the ATO wants an estimate of that as well - and income from shares is not as predictible as from property. Dallee
 
i do same as charttv and save the file, update each year. Estimates don't have to be perfect and it's always better to underestimate, so you can still get a tax refund at the end of the year. With a mix of fixed & variable interest rates on my loans, the interest rate rises always give me a bit of leeway and add to the underestimate.
 
OK, I'm going in! Thanks for the advice.
Anyone got the link handy to do the ITWV online? I only have the hard copy.
Thanks in advance.

Rob
 
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