If I asked you, "would you rather pay your tax bill before it was due or when it is due?" I hope you would say when its due, I don’t know too many clients that would be happy to give their money to the ATO before they needed to.
If you agree with this statement and you have substantial tax deductions which generates you a tax refund at the end of year, why are you waiting until after 30 June to get that tax back? By preparing and lodging a PAYG withholding variation early in the financial year you can save tax as you go.
By preparing and lodging a PAYG withholding variation through which you notify the ATO of estimated income and deductions for the year the ATO will send your employer a letter allowing them to reduce the amount of tax withheld from your salary. This results in extra cash flow throughout the year, thus rather than waiting until July the following year to get a large refund you will have this cash in your hand throughout the year.
What's the major benefit of this? The ability to utilise the extra cash flow for debt reduction, holiday savings or investments.
Some of the more common variations are lodged for the following;
- Negative geared rental properties
- Negative geared investments portfolios
- Motor vehicle deductions
If you think you might benefit from a PAYG withholding variation please contact your advisor to discuss this in more detail.