Does anyone have any experience/ insight into using the 221d- variation of Tax installment Deductions
In which you essentially apply to the ATO for a variation to the tax taken out of your wages by your employer, due to yourself having a Investment property which you claim as a tax deduction..
By paying less tax on your wage ( sometimes 2 %), rather than recieving it as a tax return at the end of the financial year- you get more ca$h in your hand now (to reduce your loan or use to finance another IP)
NOW.. i’m only posting my ‘basic’ understanding of this, i really don’t have a clue [
] what i’m looking for is anyhelpful advice.. is this worth persuing ?Does anyone have any advice ??
I take it you need a stable income and a – geared property ?
REDWING- The confused
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Yes I do, I will explain:
This information is from a book I read
“More Wealth from Residential Property”If you are a PAYG (Pay As You Go) worker and receive tax benefits as a result of negative gearing, you are entitled to a tax refund at the end of the financial year when your true tax situation is assessed. It could be though, that you’d wait many months for a cheque refund. But it is possible to reduce the amount of tax you pay each payday so instead of waiting for a tax refund, you pay less tax through out the year. Ask yourself: if you were owed $3626 in tax benefits, would you like to wait a whole year for it, or pay $70 dollars less in tax each week?
A decade ago, all you needed to do was, write to the ATO and apply for a tax variation under section 221D. It was a simple matter. Today, the ability to vary your tax comes under 15-15 and the ATO requires that you fill in a 16 page booklet entitled “Application for the variation of amounts required to be withheld under PAYG Income Tax Withholdings. You can submit you paper either through paper or electronically though the internet.
In due course you will receive a letter from the ATO indicating that you only need to pay a certain percentage of your income in tax. With Bill, for example, he is owned $3626, so all he needs to pay is $7559, instead of $11185 in the first year. Part of his letter from the ATO might read:
The prescribed rate of installment deductions to be made from your salary and wages has been varied to 16.08% of gross earnings per pay period. This is in accordance with Section 15-15 schedule 1 of the tax admin act 1953.
Hello Redwing
Yes I have been using this approach for some years. It’s no longer called 221D but it’s the same thing.
Basically towards the end of each financial year I sit down with the accountant and work out income and expenses for the coming year.
He fills out the booklet and I check it and sign it.
He sends it off and within a month or so my employer receives instructions to deduct an amended amount of tax from my salary.
The ATO get a bit shirty if your variation and actual tax owed are substantially different so it pays to get as close as possible with your estimates. Of course if circumstances change, like you sell/buy another property you can always submit another variation.Clive
Many thanks for the prompt replies guys..
Showing my age and lack of keeping up to date by calling it the 221D huh [:0)] 15-15
With one IP under my partners name and the other under mine, and the fact that we’re both PAYG wage earners it may be beneficial, paying extra into the PPOR loan each payday would certainly save money in the long run ( with the benefits of compounding)
IP’s on F.I – I.O for 5 yrs so this would help also i believe as the figures are the same each month ?
My wage is a bit up and down with overtime / extra shifts etc.. but essentially ok..
I’m starting to think of tax time 2003-04 already and planning ahead.. should i see my accountant now ( after Xmas) or wait until the end of financial year as by the time it’s sorted i guess we’ll be there ?
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
With one IP under my partners name and the other under mine, and the fact that we’re both PAYG wage earners it may be beneficial, paying extra into the PPOR loan each payday would certainly save money in the long run ( with the benefits of compounding)IP’s on F.I – I.O for 5 yrs so this would help also i believe as the figures are the same each month ?
My wage is a bit up and down with overtime / extra shifts etc.. but essentially ok..
I’m starting to think of tax time 2003-04 already and planning ahead.. should i see my accountant now ( after Xmas) or wait until the end of financial year as by the time it’s sorted i guess we’ll be there ?
[
Redwing
Paying down your PPOR loan with extra money from variation is a good strategy.
Fixed interest only loan makes calcs easier for coming year.
I would do calcs based on base wage without overtime if it is uncertain.
Getting to your accountant earlier rather than later is a good idea. If you wait until end of financial year you may find the accountant is busier than usual and the process will take longer.Clive
Thanks S.M.T.M
After a while on this forum I’ve got “lots” to talk to my accountant about, or find a accountant with an active interest in property investing.
My base wage guaranteed 39hrs p/wk but usually winds up more, with extra shifts, overtime and with people being sick etc ( Christmas seems to be a very bad time for this, or their sisters, friends, neighbours, kids, cat dies – so they can’t come to work)
‘Not’ intending to sell in the near future, do they make the booklet 16 pages to put you off ?? [
]An extra $40-100 or whatever off the loan each payday would save many $$ in the long run [
]REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
Redwing
You’re up early today!
showmethemoney
On night shift at the moment, log on every so often and catch up on the forum ( it moves pretty fast ) finding it ‘very’ informative and keeps me thinking and awake
Also check on my commsec site and a few other sites, enjoy property though, it’s always done well for me, recently spoke to my mortgage broker and have some $$ i can play with again. waiting for valuations on other properties to come in from the agents, so just looking at my options [
][][^]REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
showmethemoneyOn night shift at the moment, log on every so often and catch up on the forum ( it moves pretty fast ) finding it ‘very’ informative and keeps me thinking and awake
Redwing
What a coincidence, I am also on nightshift, well midnight to midday actually. Only 2 weeks to go.
Clive
i have been using the PAYG withholding tax form or whatever you call it for a few years now. and if you have a monthly commission and no IP’s it also works, although i also have IP’s.
one thing i have noticed, but have been fortunate due to overtime etc. is that you need to allow for medicare. after filling out the forms, the ATO works out a percentage of tax that you pay per week/fortnight/whatever, but this does not allow for medicare. so if you were to work a perfect 38 or 40 hour week, you will end up with a tax bill at the end of fin year for the medicare levy. now, it’s not that we shouldn’t pay it, but, be prepared, no one likes a surprise bill.
SHOWMETHEMONEY $ AND RYANMEL
How do you find this system ?
Preferable to waiting untill the end of the financial year and recieving it as a ‘lump sum’ ?
With the LOC mortgage i have on my PPOR it may be more benificial to recieve the extra ca$h in my paycheck each fortnight, saving me $ over the course of the year by having more ca$h in the account, reducing interest each day.
REDWING
“The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”
SHOWMETHEMONEY $ AND RYANMELHow do you find this system ?
Preferable to waiting untill the end of the financial year and recieving it as a ‘lump sum’ ?
Redwing
The way I look at is I would rather have the money to use now than effectively loan it to the ATO for 12 to 18 months interest free. A dollar today is worth more than a dollar tomorrow.
The effect for you in paying down your home loan would be worth the extra paperwork and accountants fee I am sure.Clive
] what i’m looking for is anyhelpful advice.. is this worth persuing ?
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