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2017 PAYG Variation Time

Discussion in 'Accounting & Tax' started by Paul@PFI, 11th May, 2016.

  1. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The ATO have closed off the 2016 variations and now have the 2017 variation process ready to go.

    For those who have any interest I have a client checklist which can be a good basis to collect the data for the return.


    Update : For those that arent aware...
    A PAYG Variation is a way of estimating your 2017 year tax position so that losses from neg gearing etc (or other tax issues such as allowances etc) can be pre-estimated so that the employer tax that is deducted is adjusted to a lower level. The ATO write to the employer and advise a (fixed) % of tax rather than the normal tax scales applying to wages.

    The strategy is that this can improve cashflow by bringing forward SOME NOT ALL of the tax refund into lower employer tax of wages for each owner if they choose. There are some catches:
    - Dont ignore capital gains
    - Allow for unexpected or expected change in income (eg maternity, return to work, bonuses, employee shares at a discount etc)
    - Monitor the estimate made. If matters change the variation can be varied.
    - Be conservative. Dont estimate repairs etc. Leave that deduction until year end etc

    Some taxpayers prefer to wait to year end. Some blend a bit of both.
     

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    Last edited: 11th May, 2016
    HUGH72, chindonly, House and 8 others like this.
  2. DanW

    DanW Well-Known Member

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    Just remembered about this (well the Mrs did).

    Better get it done so it gets back before July payroll. Not nice to see net income decrease on 1 July :)
     
  3. JJ1081

    JJ1081 Member

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    I have IP1 just finished with construction in July 2015 and rented since then. IP2 which is under construction and hoping to have practical completion by June 2016. Can I lodge tax variation for next year or I have to wait till IP2 is rented out?? Also can I lodge the tax variation by my self or it has to be done by an accountant?
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    IP2 may (or may not) be eligible for interest deductions under Steele's case principles prior to completion. Not claimed in the rental section !
     
  5. smallbuyer

    smallbuyer Well-Known Member

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    Hello, Anyone got more info about doing this?
    Do you do it online through mygov? What is the process and what details do they need?
    What do you need to provide them or do you just make a declaration and get penalized if it is wrong?
    What is the penalty if you over estimate?
    If you overestimate your deduction but then have other tax rebates like franking credits or NRAS will you get penalized?

    cheers
     
  6. Elives

    Elives Well-Known Member

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    If you change employers do you have to re do the whole process again or does the ATO automatically tells the new employer? :s
     
  7. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    You must reapply. A PAYG variation is specific to the employer/s nominated. The ATO write to them and advise their calculated % tax to withhold.

    The variation can also choose to apply to bonuses or not. Many employers get that wrong (since their software adopts a fixed %) and end up short taxing bonuses
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There are penalties if a variation is made and the resulting assessment falls short. In addition to interest a shortfall penalty of of up to 75% can also be imposed.

    It is not available through mygov. Its basically a short version tax return with employer and payroll details also provided so the ATO can contact the employer. I generally advise clients to claim some but not all of the expected tax position so that there is still leeway for a final refund when the return is lodged. eg dont claim work related and repairs etc.
     
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  9. USC

    USC Active Member

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    Why is the ATO living in that past - can they not design a form that works across different systems/browsers? It is so annoying how incompatible the form is.

    "The e-variation is not compatible with Apple Mac and Microsoft Surface Pro and is not supported by Firefox or Google Chrome."

    Am I the only one annoyed about this? I have to use my non-Apple (old) laptop and IE - the only time each year that I use IE. Do accountants who lodge the form use this one or is there a separate accountant portal?
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    What other choice is there!

    You are not the only one.
     
  11. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    You bought a surface pro...LMFAO.......
    Microsoft have lost the plot with its latest and recent OS. We just had the upgrade to 10 forced on us and its doing my head in. I thought apple dictated how to do things. Microsoft are the OS nazi's.

    You can install Internet Explorer 11. It works. That is the issue we have. Few browsers support the ATO Tax Agent Portal. Thank Gods its going to the bin soon.

    BTW, I found a bug in the PAYGV evariation today. If you save it and come back the next day it cant be used. It loads the previous days date. The signing date cant be changed. So...start again.

    It insists in a circular fashion preventing the change. Cant save it, move page, change year, month etc. Its BS. ATO response ??? Its been doing that for a while I dont know when they will fix it.
     
  12. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The same crap process....Due to the TAP being closed they arent prepared to develop it there. And its not a lodgment form we complete in software.

    The evariation hasn't changed in at least 10 years to my knowledge.
     
    Last edited: 1st Jun, 2016
  13. JohnPropChat

    JohnPropChat Well-Known Member

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    With falling interest rates. What % of expenses should be used to be on the safe side?
    How about professional membership fees?
     
  14. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I generally dont recommend costs you dont know about eg : repairs. Also hold off on work related stuff if its small stuff. That way you leave a buffer so a refund still occurs when you lodge.

    IMO just make it realistic and ignore small stuff. Assume a fall in rates rather than them staying at this level. Assume rents rise and costs dont.
     
  15. smallbuyer

    smallbuyer Well-Known Member

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    thanks for the info. Just curious about the penalties? 75%? seems a bit harsh. Do these penalties apply if you dont actually owe anything when you do your tax? eg you have franking credits or NRAS?

    cheers
     
  16. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Thats a rare penalty esp for a variation. I saw a recklessness last year for a variation. It wasnt very smart of the taxpayer to claim his wife's share of neg gearing losses twice...He told ATO (before he spoke to me!!...He did the variation) he needed the cashflow and he admitted to knowing he would have cash from a house sale to pay them back the debt he expected..He scammed them for a loan in my books... I thought he was lucky not to get 75%

    • Failure to take reasonable care: The base penalty is 25% of the shortfall amount. Generally, you fail to take reasonable care if you have not done what a reasonable person in the same circumstances would have done.
    • Recklessness: The base penalty is 50% of the shortfall amount. You are reckless if a reasonable person in your circumstances would have been aware that there was a real risk of a shortfall amount arising and you disregarded, or showed indifference to, that risk.
    • Intentional disregard: The base penalty is 75% of the shortfall amount. You intentionally disregard the law if you are fully aware of a clear tax obligation and you disregard the obligation with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement).
     
  17. smallbuyer

    smallbuyer Well-Known Member

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    Thanks for that info Paul.
    If you have NRAS or franking credits so you dont actually owe them anything (or you have big refund still, if you have enough NRAS) does this mean their isn't actually a shortfall amount?
    So perhaps someone with enough NRAS or franking credits could use a variation to effectively bring forward the payments (or to put it another way stop the ATO holding onto your money) for these without risk of penalty?
     
    Last edited: 2nd Jun, 2016
  18. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Correct. Neg gearing and expected tax credits will be reasons to vary. This can bring forward some of that refund up to a year (since most NRAS certs seem to take an eon to be issued)
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Don't forget you cannot claim all the interest on loans used to buy NRAS properties because part of the income is exempt from tax.
     
  20. smallbuyer

    smallbuyer Well-Known Member

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    So if one is filling in this form and has more than 4 properties can they add them?
    Also can NRAS credits be put in, perhaps in Tax offsets?
     
    Last edited: 10th Jun, 2016