Tax office holding on to investors' money!
If you are considering investing in residential property in Australia there is wealth hidden in your salary:
1. By structuring an investment property to take advantage of negative gearing, significant taxation benefits can be obtained;
2. By selecting a property to obtain maximum NON-CASH deductions, like depreciation, taxation benefits can be significantly increased;
3. By lodging an ITWV application with the ATO tax benefits can be accessed when you most need it most – each week – helping to relieve cash flow restrictions now.
Investors who gear their property to gain maximum income tax benefits and who are subject to normal withholding tax from their weekly pay can attract substantial tax savings and refunds. A refund for a single property can be as much as $14000 per year. Without a weekly tax variation in place, these funds are held by the ATO until the annual tax return is lodged.
Having a lump sum at year end is nice, but it can put pressure on an investor’s weekly cash flow.
By lodging a weekly tax variation (ITWV application - see below), investors can request the Australian Taxation Office to vary the amount of PAYG tax withheld from their weekly pay, resulting in more take home pay, releasing funds towards costs of the investment like loan payments, rates, body corporate fees etc.
What is tax variation - ITWV?
An Income Tax Withholding Variation (ITWV) was previously known as a Section 221YD variation. It is an annual application made to the ATO to vary the amount of tax withheld from your salary each pay period by your employer. The variation is valid for the whole of the financial year (1 July to 30 June next) If lodged part way through the year it also takes into account the amount of tax withheld from your salary to date of application.
It simply means that a taxpayer who is entitled to a large refund at the end of the year can access the funds each pay period rather than waiting until their annual tax return is completed and lodged. There are various circumstances where an ITWV may be appropriate, and sometimes necessary.
Negatively geared investments such as investment property (residential or commercial) or share portfolio large deductions relating to allowances received from your employer – e.g.car expenses, Tax Offsets not taken into account in your PAYG withholding – e.g. senior citizens tax offset. Taxpayers affected by these circumstances can experience cash flow restrictions without an annual ITWV in place.
Who should use an ITWV?
This form should be used when the payee (employee) wants to reduce their pay as you go (PAYG) withholding rate for the year ending 30 June next.
How do you use an ITWV?
Once an ITWV is processed, the ATO will notify your employer of a "varied" amount of tax to be withheld from your pay each pay period. Fast delivery of your Taxation & Investment Property requirements The ATO processes most ITWV applications within 10 working days. We recommend applications to be lodged at least 2 weeks prior to existing variations expiring.
Tax Depreciation Report Explained
There are over 1.5 million property investors in Australia. Many of them are not claiming their full tax entitlements because they don't have a tax depreciation report. Also known as a Tax Depreciation Schedule the report outlines the tax depreciation and building allowances that an investor is entitled to claim as a tax deduction.
A tax depreciation report can only be prepared by a registered Quantity Surveyor who inspects the property and constructs an ATO compliant tax depreciation report. The report can provide additional NON-CASH deductions, generating a larger tax refund, producing a greater return on an investment property portfolio.
Within our system and group of independent affiliated organisations we can help put all this into place for you.