We have all heard about businesses varying their PAYG instalments on their Activity Statement if their business and investment income for the current year is expected to be less than anticitpated. However, the opportunity also exists for salary and wage earners to vary downwards the amount of PAYG tax deducted by their employer each pay cycle. The main purpose of varying the rate or amount of PAYG withholding is to ensure that the amounts withheld during the income year better align with your year-end tax liability if you are a taxpayer who has significant deductible expenses throughout the year which may be the case for:
By having less PAYG deducted, you are improving your cash flow. Rather than having to wait until year end to receive a sizeable tax refund, the refund is effectively flowing through to you in each pay cycle. You then have control over this money earlier than you otherwise would and can use it to invest or discharge your everyday expenses etc. If you think you may fall into this category of having large deductible expenses, then you should complete a PAYG withholding variation form which is availbale on the ATO website. //www.ato.gove.au or consult your tax advisor.
- Property owners who are hightly negatively geared; and
- Taxpayers, such as salespeople, who have large travel expenses and other costs.
Before employing this strategy, be aware if the deductions you anticiapated having during the year do not materialise, or indeed, your untaxed income (such as rent, interest, dividends etc.) is higher than you anticipated for the year, you may end up with a tax bill when you lodge your return.