I’ve been working just under an ABN through an agency since November last year. I’ve been withholding all Tax, putting what I would have to as PAYG in home loan offset account. Let’s say it’s about ~$50k.
Now that it’s Tax time I want to know best strategy because I want to invest this money more than just keeping interest down.
My accountant moved on from his company so that’s why I’m here…
1) We discussed that if I lodge Tax11/12 before October 2012 – I will have a lump sum tax payment due in May 2013 ($50k) and go into PAYG instalments for 2012/13 based on this financial year income, correct?
2) If I withhold lodging Tax11/12 until May 2013 – I will have a lump sum tax payment due straight away ($50k)? And then what happens? Do I just keep withholding as I am this financial year or will Govt want some money up front? Confused…
vucko84 wrote:1) We discussed that if I lodge Tax11/12 before October 2012 – I will have a lump sum tax payment due in May 2013 ($50k) and go into PAYG instalments for 2012/13 based on this financial year income, correct? 2) If I withhold lodging Tax11/12 until May 2013 – I will have a lump sum tax payment due straight away ($50k)? And then what happens? Do I just keep withholding as I am this financial year or will Govt want some money up front? Confused…Not an accountant but this is what my understanding is
1) lodge in October 2012 and you will have to pay the tax bill within a month or two. Why would they let you wait until May 2013?You will then go onto installements quaterly based on 2011/2012 turnover and some GDP BS that they add on too.
2) lodge in May 2013 and pay by June 2013. Go on to quaterly installements same as above.
Marty McDonald | Mortgage Experts
http://mortgageexpertsonline.com.au/
Phone MeHi Marty/Others,
In regards to working under an ABN though an agency, how does this effect borrowing ability? For example, I have been employed in engineering for 5 years under a salary arrangement, but am considering taking up a position where I am paid under an ABN through an agency. Would this impact my borrowing ability if I want to purchase another investment property in the next 12 months? Do the banks consider this arrangement as being the same as being employed under a salary?
And taking it a step further, would banks still be willing to lend me money if the arrangement was me working for a relatively large company, employed through an agency and paid through a Pty Ltd structure?
The reason I am asking this is that it might appear that I am self employed and I am thinking the banks might want say 2 years of tax returns for the company structure (or personal ABN tax returns), when in reality it is exactly the same as a salaried position but the method of payment is different. Whether or not banks would lend to me is iomportnat as I dont want to change how I am paid if it means I can't borrow money anymore!!
Cheers,
Luke@marty – I was told by an accountant that withholding as late (May, 2013) as possible is common practice. Having said that, you would get a lump sum Tax bill in May, 2013 of $50k for example then another $50k again due in June, 2013. Bit rough.
@luke – I bought my IP then went into contracting within 5 months. I asked to top up to renovate for $20k and got rejected even though I am getting double of what I was with full-time. They wanted more payments and Tax Assessment. If you’re looking at IP in 12 months then you should be ok. You might get a higher interest rate though.
Pty Ltd might be better as you’ll be paying yourself a constant amount each month like a full-time employee whereas agency will pay based on hours you do so it might fluctuate if you take time off. I think banks like to see consistency. If you’re not sure best to speak to your bank and see their criteria.
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