Tax Variation

[pjb89]

Hi all,

I have 2 questions....

1) What is the preferred method of recouping your taxable deductions? Submitting a Tax Variation form to the ATO and receiving the monies each pay period or waiting till the end of the year and receiving a lump sum? and

2) Where the investor has a variable income does this make claiming the flat % reduction of tax paid more problematic such that he/she might be up for a tax bill at the end of the financial year due to a swing in income from previously?

Thanks

Peter

 

[Alan H]

Peter,

Personally I submit a Tax Variation Form as I can't stand the idea of 'loaning' the ATO some of MY money for a year.........and really that's what it is!

Ok. There is always the other side of the argument and that is "what will you do with that extra weekly/fortnightly tax deduction?". If the answer is, it will most likely get frittered away, then maybe getting one big tax cheque at the end of the year is better in that you only have to think about it once and you may do something more responsible with it.

Is one or the other better? Depends on the individual.

 

[geoffw]

Peter,

I have no choice in the matter. I invested in an agricultural scheme some years ago- now the ATO regards me as a tax cheat- and does not allow my tax variation application.

But, I do find it good discipline to have that money put away- a cheque for $20K is very usefule in the property game- and I've probably got that because I've had to forgo a few doodads along the way.

As far as point 2- I believe that you are allowed to vary the estimate of your income in the year if circumstances change.

 

[DaleGG]

Hi Peter!

Originally posted by pjb89
Hi all,

I have 2 questions....

1) What is the preferred method of recouping your taxable deductions? Submitting a Tax Variation form to the ATO and receiving the monies each pay period or waiting till the end of the year and receiving a lump sum? and

2) Where the investor has a variable income does this make claiming the flat % reduction of tax paid more problematic such that he/she might be up for a tax bill at the end of the financial year due to a swing in income from previously?

We see both approaches. I personally like to wait until the end of the year as I see too many people squander the tax saving, as Alan suggested.

However, a variation might work even better if you use a LOC as the tax saving is sitting in your bank account and not the tax office's for the year.

As for the variable income . . . yes, this does mean that you have to be careful in your estimate and so we normally suggest that you leave a little up your sleeve when preparing the vriation so that there is less scope for pain at the end of the year.

Worst case scenario, the tax office will give you a bill and so you will have used their money during the year!!! Be careful though as they may not allow to do this too often before they close down this avenue for you.

Have fun

Dale

 

[pjb89]

Hi Dale,

You've hit the nail on the head there....I was thinking much the same.

You said that

However, a variation might work even better if you use a LOC as the tax saving is sitting in your bank account and not the tax office's for the year.

Can you please expand on this as I am very new to all of this ....

Peter

 

[Rixter]

I personally prefer to get a Variation for the following reasons-
1/ Maximises your cashflow across your portfolio throughout the year.
2/ Your money is better in your pocket than the ATO's as they dont pay you any interest and your disadvantages by not having access to it.
3/ If you elect to get a lump sum at the end of the year, you have to cover your portfolio expenses from your after tax dollars, which in turn effectively you have given yourself a pay cut as your operating expenses have to now come from your lifestyle budget.
4/ Your extra money in your pay each payday sits in your LOC and reduces the balance therefore you pay less interest to your finance provider.