Progressive Tax Refunds With An ITWV
Instead of waiting until the end of the tax year to get your hands on any tax refund you are eligible for, it may be possible for you to get that tax refund pro-rated every week/month as you go.
If you have tax withheld from your pay and you are being paid a salary under the PAYG (Pay As You Go) system, you can apply to have a weekly tax variation put in place.
This is known as an ITWV (Income Tax Withholding Variation) and was previously known as a Section 221YD variation under the previous system.
If you are a property investor, you will have tax deductible expenses such as interest on an investment property loans, rates, water charges, rental agents managing fees, maintenance and depreciation write downs. What typically happens is you claim these expenses on your annual tax form and you subsequently receive a proportional refund depending on the tax rate you are on.
Instead of waiting until the end of the tax year to get this refund, you can make an application to have this refund paid to you throughout the year by having less tax taken out of your salary. In effect, you are able to bring your tax refund forward to give yourself more money in your pay packet each week. This will improve your cash flow and could be useful for you to use this extra cash to pay for expenses on your property or even put the extra money in a loan offset account to reduce your interest payments……in fact you could use this extra money for anything!!!
What you need to do is fill out an ITWV form (which can be found on the Australian Tax Office website) and submit it as per the instruction provided on the application.
Once it is successfully processed, the tax office will advise your paymaster to take out less tax from your pay packets until the end of the current tax year.
A new ITWV should be submitted for each new tax year.
If your circumstances mean that you are eligible to apply for an ITWV, we highly recommend that you pursue this and look into it further. You can find more information on the ATO website. As usual, we also recommend that you speak to your tax accountant and advisor’s to ensure this strategy is right for your own circumstances and the estimates made are reasonable.
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Property Friends is a specialist Property Investment Strategist that provides solutions for people aspiring to financial independence, choices in retirement, or leaving a legacy. www.propertyfriends.com.au (03) 9758 5331