Elevate Tax + Accounting

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benefits of a payg variation

Choosing to use a Pay As You Go (PAYG) withholding variation may enable to you to increase your cash flow by reducing the amount of tax that your employer withholds, meaning that you get more in your hand each pay. 

What is a PAYG withholding variation?

A downward variation is a way that you can take advantage of tax deductions throughout the year by varying the amount of tax your employer withholds each pay, as opposed to getting a larger refund at tax time and waiting up to 12 months. 

An upwards variation increases the amount of tax your employer withholds on your behalf each pay cycle. This option is for people that may usually get a bill at tax time and want to pay extra tax to minimise the end of year amount. 

How can I do a PAYG variation?

Your accountant will organise a PAYG Withholding variation by submitting estimated financial information to the ATO – contact us to arrange here

Once a request has been approved by the ATO, your employer will adjust the amount of tax withheld.

Case study: PAYG withholding variation and depreciation deductions

Joe purchases a brand-new house for $780,000 which is rented out for $680 per week, or $35,360 per annum. Joe has expenses including interest rates, repairs and maintenance, property management fees and insurance totalling $45,000 per annum.

*Based on a tax rate of 37 per cent.

If Joe doesn’t claim depreciation, he receives an additional $137 per fortnight by applying his PAYG withholding variation. But with a depreciation claim of $15,538, Joe receives $358, an additional $221 in his fortnightly pay.

As we can see, a PAYG withholding variation provides Joe more flexibility by having access to money on a regular basis rather than a lump sum once a year.

Because a PAYG withholding variation provides investors access to money during the year, it enables easier management of cash flow, especially in the event of surprise costs such as urgent repairs or maintenance. This additional income also provides the owner with the option to invest the extra money or reduce loan liabilities.

The information provided in this article is of general use only and should not be taken as advice. Before making any decision based on this document, you should assess your own circumstances and seek tax advice from a qualified accountant at Elevate Tax

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