{"id":19823,"date":"2017-12-18T01:00:29","date_gmt":"2017-12-17T14:00:29","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=19823"},"modified":"2017-12-18T01:00:29","modified_gmt":"2017-12-17T14:00:29","slug":"payg-for-investors-brad-beer","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/payg-for-investors-brad-beer\/","title":{"rendered":"PAYG for investors – Brad Beer"},"content":{"rendered":"

Investors often wait until the end of financial year to take advantage of depreciation and the other deductions they are entitled to, but there is a method which allows investors to receive their deductions more regularly. Brad Beer<\/strong> explains how a PAYG withholding variation works and why this process will help investors.
\nTranscript:<\/strong>
\nKevin:<\/strong>\u00a0 Investors wait until the end of a financial year to take advantage of depreciation and the other deductions that they\u2019re entitled to, but there is a method which allows investors to receive their deductions more regularly. This involves submitting a Pay As You Go (or PAYG) withholding variation with the help of an accountant. Brad Beer from BMT Tax Deprecation joins me.
\nBrad, can you explain how a PAYG withholding variation works and why including depreciation claim in this process is going to help investors?
\nBrad: <\/strong>Yes, sure.
\nKevin:<\/strong> \u00a0And hello, how are you?
\nBrad:<\/strong> \u00a0It\u2019s great to be here Kevin, as always.
\nIn about July 2000, they introduced the PAYG variation, and one of these is the legislation that simply allows you to change the way that the tax is paid or when it\u2019s paid.
\nAt the moment, you go to work, your employer pays you each fortnight or month, whatever it is, and they actually hold on to the tax and pay it to the government. You can actually have one of this adjustments done and say, \u201cLook, I\u2019m going to have some deductions this financial year and rather than the employer taking that tax out for me, how about we take out how much tax only is needed to be taken out through the year? And therefore, I\u2019ll pay less tax throughout the year and increase the cash flow through the year.\u201d
\nIt means you don\u2019t get a good tax return at the end of the financial year because you\u2019ve already worked it out, but it\u2019s a good way to keep hold of your cash rather than allowing it to be with the tax office for that year.
\nWhere a depreciation schedule fits into this is that depreciation is one of those deductions that because it\u2019s a non-cash deduction, at the end of the year, you get this quite substantial deduction that you haven\u2019t paid out.
\nWhat happens is you end up by reducing substantially your tax through the year instead of getting a big tax return at the end of the year. It\u2019s just one of the deductions that comes into that and it makes a pretty big difference because it\u2019s a non-cash deduction and the employer keeps the tax and gives it to the tax man and you could have that money and put it into your offset account or help reduce debt through the year instead.
\nKevin:<\/strong>\u00a0 Further to that, just to take that a little step further, what difference can a depreciation claim when it\u2019s combined with submitting a PAYG withholding variation make to an investor\u2019s cash flow, just from your experience, Brad?
\nBrad:<\/strong> \u00a0A simple example of a property worth about $500,000. We\u2019d see the deduction in the first year for depreciation to be about $10,000 on something like that. So, claiming or not claiming depreciation, it will depend on your marginal tax rate, but with a 37% marginal tax rate, a little case study that says \u201cDon\u2019t claim it, do claim it,\u201d the difference between the cost of owning a property of that sort of value is in the vicinity of $160 a week. That\u2019s a fair bit of money, because a $10,000 deduction makes a big difference if you don\u2019t pay it out.
\nWe invest in property to make money at the end of the day, and you do that through capital growth and through cash flow. Capital growth: you need to choose them in the right areas and do those sorts of things. And cash flow is maximizing the rent, minimizing the interest and the expenses, and maximizing the depreciation \u2013 and so you might as well get it.
\nKevin: <\/strong>\u00a0I know how delighted I\u2019d would be if a tenant offered to pay me an extra $160 a week. I\u2019d be pretty happy about that. That\u2019s for sure.
\nBrad:<\/strong> \u00a0You can\u2019t rent it for $160 a week over market because it will be vacant.
\nKevin:<\/strong> \u00a0That\u2019s right; exactly.
\nBrad, does a PAYG withholding variation negate the need to submit a tax return?
\nBrad: <\/strong>\u00a0No. What it is it\u2019s a variation to what your tax return will look like at the end of the year. Your accountant does it. I\u2019m not the accountant, but what it means is you\u2019re estimating what the year is going to look like based on what you know, rather than the traditional method, which is you get to the end of the financial year, you submit everything to the tax office, and they give you the tax return.
\nYou still need to do that tax return, but this is up-front telling the tax office before it happens, what\u2019s really going to happen, because you know.
\nKevin: <\/strong>\u00a0What advice do you recommend investors should seek out before the consider taking up this option, Brad?
\nBrad: <\/strong>\u00a0It\u2019s a discussion with your accountant, because it doesn\u2019t necessarily work for every type of taxpayer. Most people or a large percentage of people are salary- and wage-earners in this country, and then your employer takes some taxes out of your check every time they pay you.
\nIf you\u2019re in a situation based on deductions that you know are going to happen \u2013 like property deductions, depreciation \u2013 is going to be different by the end of the financial year and you know that, it\u2019s the time where it\u2019s probably worth it. But talk to the accountant about that first and make sure it\u2019s going to be available before you go and try to do one.
\nKevin:<\/strong> Great advice. Something interesting, Brad, because it\u2019s something I didn\u2019t know about, so thanks for enlightening us. Brad Beer from BMT Tax Depreciation.
\nBrad, thanks for your time.
\nBrad:<\/strong> Thanks Kevin. A pleasure, as always.
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Investors often wait until the end of financial year to take advantage of depreciation and the other deductions they are entitled to, but there is a method which allows investors to receive their deductions more regularly. Brad Beer explains how a PAYG withholding variation works…<\/p>\n","protected":false},"author":176692471,"featured_media":19824,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,36,25],"tags":[101],"class_list":["post-19823","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nPAYG for investors - Brad Beer - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/payg-for-investors-brad-beer\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"PAYG for investors - Brad Beer - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"Investors often wait until the end of financial year to take advantage of depreciation and the other deductions they are entitled to, but there is a method which allows investors to receive their deductions more regularly. 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