Tax debt = interest free loan

Discussion in 'Accounting & Tax' started by legallyblonde, 1st Jul, 2016.

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  1. legallyblonde

    legallyblonde Well-Known Member

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    Welcome to July.

    Once I complete my taxes I will end up with almost $5k owing to the ATO as a result of having three jobs and two positive cashflow properties.

    I keep repeatedly saying ...interest free loan...

    I am resisting the urge to have more tax withheld because I love having the extra cash in my offset.

    Job 1 is about 50% of my income
    Job 2 is about 40% of my income and I am not claiming the tax free thresehold
    Job 3 and IPs make up the last 10% and have no tax withheld.

    I will di my taxes as late as possible...is there anything I should be aware of with regards to tax debts?
    I believe yoy cannot borrow money until the debt is repayed?

    If my job situation doesn't change I will be in the same boat next year
     
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  2. EN710

    EN710 Well-Known Member Premium Member

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    Why not get an accountant? You can delay it until early next year.

    Not aware of this? Hubby didn't pay his until early this year and we got a loan without issue
     
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  3. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    It won't be a debt until the ATO issues a notice of assessment.
     
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    But....You haven't considered that the ATO will also invite you into the world of PAYG instalments soon after you lodge so that you pay 25% of the expected FUTURE shortfall every quarter. There will be a catch up period too. So you may be asked to pay $10K not $5k. (ie 2016 tax $5k and 2017 instalment of $5k) Maybe not all at once either but in close proximity.

    Using a tax agent can defer that problem by a further 6 months...possibly
     
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  5. wogitalia

    wogitalia Well-Known Member

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    Debts of 5k probably wont accrue any interest even after lodgement with the ATO because of how their system works, though you will get harassed by them once it's lodged if you haven't paid it.

    As has been said, seeing a tax agent could buy you until May/June 2017 to lodge and pay the amount.
     
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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    And when a lender asks if you owe any money you wold have to disclose (or lie).
     
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  7. legallyblonde

    legallyblonde Well-Known Member

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    Is this something that I could avoid by stopping the tax free threshold that I am claiming at Job 1? This situation would be negotiable?

    I would pay the debt as soon as the bill was due (as I have the funds available). Whatever the standard window is.

    Very handy to know for future reference. But will probably not affect me in the near future.
     
  8. Jennifer Duke

    Jennifer Duke Well-Known Member

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    THIS. Enjoyed very much having an extra $10k in the offset for a year. Now has to be paid quarterly. Damn.
     
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  9. legallyblonde

    legallyblonde Well-Known Member

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    Update: Completed my taxes late last month. My bill arrived today (approx $4.2k as expected) and it is due later in the month.

    If they were going to ask for quarterly additional tax payments to be made when would I expect to hear about this? This is my first debt =)
     
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  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The benefit to this is pretty significant - I currently have approx 18 months worth of tax sitting in my offset. Loving it. Just got to be careful not to accidentally spend it on a house.
     
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  11. Rob G

    Rob G Well-Known Member

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    Why is no tax withheld on "Job 3" ?
     
  12. legallyblonde

    legallyblonde Well-Known Member

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    Work a three hour shift vary rarely ☺
     
  13. Bran

    Bran Well-Known Member

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    Yeah, I'm dreading this...

    Haven't paid tax for over a year. Baulking on my return. Highest tax bracket. Yikes...
     
  14. Bran

    Bran Well-Known Member

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    Ha ha. This!
    I'm carrying on uninterrupted. I figure I will worry about it when I get the bill.
     
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  15. legallyblonde

    legallyblonde Well-Known Member

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    Looks like I forgot to post an update! ATO asked me to prepay about $2.5k. I arranged for it to be paid in a lump sum (due about October from memory).

    In Jan I stopped claiming the tax free threshold at Job 1. So I am still expecting a debt this year (about $6k) BUT if I am still in these current roles next FY it shouldn't be as bad! My portfolio of two is positively geared normally, however it is currently turbo charged. IP1 tenants are paying $20-30 under market value, once you adjust for my time (finding new tenants, managing tenants) and paying extra it is not worth it for me to increase the rent. IP2 is positively geared too, however, it is turbo charged due to tenants negotiating to pay an extra $100 a week to increased approved occupants (family). The rent will reduce to normal just before Christmas. So next FY shouldn't be as harsh tax wise since I will be taking a hit to rental income ;)
     
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  16. thesuperman

    thesuperman Well-Known Member

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    But can't you nominate to have the quarterly PAYG instalments changed to annual instalments so payments are delayed until the end of the financial year therefore buying you some time so you can make some bank interest on those funds?
     
  17. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Not true. In every instance if a client is eleigible for annual instalments I take th election and defer by CHOICE.. Deferring tax can be a huge benefit. Sometimes other options exist to defer too. It depends of many factors. Ongoing review of instalemnts that are not too low or too excessive is a common issue
     
  18. hash_investor

    hash_investor Well-Known Member

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    When you lodge your tax return you will get a notice of assessment with tax debt and a due date. That due date will be in march next year. But then you will have to pay next year's tax every quarter.
     
  19. legallyblonde

    legallyblonde Well-Known Member

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    It defaulted to quarterly and I phoned to request annual
     
  20. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

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    Only some taxpayers can elect annual... Its based on the sum due.