PAYG Instalments Help!

[Daz4130]

Hi Everyone,

I'm looking at a second investment being a duplex. I'm intending on buying both and renting both out with a potential income of $1600 - $1700 per week on top of my existing property returning $600 per week. In total approx $2300per week investment income.

Now doing calculations i'd be forced into quarterly instalments.
43.02% rate is based on my last annual instalment for bank interest, whether this fluctuates im not sure? I'm new to this game.

$1700 + $600 = $2300
$2300 x 52 = $119600
$119600 x 43.02% = $51451.92p.a.
$51451.92 / 4 = $12862.98p.q.

Based on this and the fact I make approx 100k gross i would not be able to afford to do this especially including Land Tax $12324 + Rates $4176 + Water + $1500 approx. The grand total being almost $70000

My question is how on earth do people afford multiple invesment properties given the above example. Is there a way to avoid paying PAYG instalments and have it sorted at tax time instead of paying, then waiting till EOFY to get it back or part of it back?

Any help or ideas would be appreciated. I will be consulting my accountant tomorrow just throwing it out there for any thoughts or opinions.

Darren.

 

[Prop_Perspectiv]

I'm no expert on this but.....

You are talking like it is $2300 per week clear. Is it? Are you paying back loans etc with the $2300? In our business if we paid tax on our gross income per week we would be broke in no time.

 

[handyandy]

You are getting a little ahead of yourself.

A PAYG payment is based on Net earning not gross earning as you have calculated.

I assume you would have interest payments to make and you have already indicated you have rates and possibly land tax. You may also have management fees and water rates.

All these cost are subtracted from your gross income to arrive at you net taxable income.

As such it would be $119600 - (Land Tax $12324 + Rates $4176 + Water + $1500 approx) - (interest payments $66000 approx) - Management costs($7176 approx) In your pocket maybe $28,424 although I doubt it.

Thus your tax on this would be the amount from from this sort of calculation times your marginal tax rate (43.02%)

The likelyhood is that you will be negative and in fact end up with a deduction against your salary.

In the end the only way to hold many properties is they are neutral or positive. You can only hold so many properties that are negative before you have no money left to support the negative properties.

We hold many properties but after all the expenses including maintenance and gradual upgrades we only make maybe $9k per property. Mainly because we don't pay interest.

Cheers

 

[Daz4130]

Clearly I have made a mistake in misunderstanding the word income (feeling stupid).

Yes indeed i will have borrowed funds to buy the properties. I've gotten quite confused with the idea of PAYG Instalments reading everywhere about it being applied to gross income not realising my gross income is infact after interest is deducted which will be leaving me negative geared.

Thanks handyandy for clearing this up.

Cheers,
Darren.

 

[handyandy]

Thanks handyandy for clearing this up.

Cheers,
Darren.

Your welcome.

What is the size of the loan you will be servicing out of this deal?

Cheers

 

[Daz4130]

Alltogehter 2.3m

Cheers,
Darren.

 

[handyandy]

Alltogehter 2.3m

Cheers,
Darren.

Whoa!!!! then you are so negative the ATO will be paying you (you wish)