Hi all, Just wondering what is it normal to get money back when doing tax. I have 2 IPs and got some money back this FY. Do most get $$ back? Matt
It is totally irrelevant whether people get money back. It all depends on how much tax their employer has withheld, their other income and their deductions.
If you earnt 100k and your employer paid 50k in taxes and you had 100k of deductions you would get "50k tax back". If you earnt 100k and your employer paid nothing in taxes and you had 100k of deductions you would get nothing back. Means nothing.
If you are getting a big refund you really aren’t using your money properly. You do not get paid interest on a refund. Consider changing your boing tax instalments so you enjoy the refund along the way. Some prefer the big one off but you are missing out on interest.
I'll be doing a withholding variation for FY19 so my tax withheld factors in property losses. Rather get a few grand boost to my payslip each month than wait until end of year to claim back a lump sum. If you have 2 IPs, you'll probably get some tax back from primarily interest and depreciation.
Don't forget if you have HECS/HELP debt, they may take a cut out of the potential tax return, which further reduces your overall amount.
I don’t believe there is a “normal” for property investment & taxes as everyone’s situation is quite different. In many instances rather extremely different. Most seasoned property investors would typically have their tax affairs arranged so that they pay less tax throughout the year to boost cashflow on a monthly basis rather than wait till annual tax time. Also, not everyone has negatively geared property & may be earning an income, for which they pay tax on. Perhaps your question is more targeted at those in the accumulation phase with negatively geared property? In that case, it “should” be “normal” to aim for little to no tax return “iff” your financial affairs are in good order.
Unless you have MAJOR tax losses ($30K and up) due to very high levels of gearing and large QS deductions combined with low rent its unusual for taxpayers to get "a few grand boost to my payslip each month". 1. Consider the total estimated tax loss (your share) for the 2019 year 2. Consider your marginal tax rate. Most taxpayers are between 34% and around 40% 3. Multiply 1. x that % in 2. as a guide to the annual potential refund 4. Take total in 3 and divide my remaining number of pay periods eg 8 months The true benefit merely brings forward the tax refund in part. Even at the benefit of banking this in a offset a $5K refund may have a present value benefit of a hundred bucks at best in interest savings, I have seen the problems that this can create too. Over estimation and errors can leave a debt later too. And failure to actually set aside the tax saving by some leaves them with regret. Most clients choose not to use a variation. They value a single large refund they can plan and save the lump sum (ie repay own home etc). Each taxpayer needs to consider their own position.
if you are good with cashflow planning variations are great. if not the cash tends to get eaten up with other things. a lump sum is easier to manage for most.
Thanks @Paul@PFI for the info. I usually leave it to tax time to claim the huge loss but my agent reminded me the variation exists. Does doing this put you on their radar for extra scrutiny? My expenses are fairly predictable each year and depreciation is in the schedule which made me consider doing an adjustment thats should be conservative (assuming a month of vacancy, no new appliances to buy etc). Better to get a larger monthly payslip to park in offset than wait a year to get a larger sum is my viewpoint.
No. However some taxpayers will have the variation face scrutiny eg NRAS tax credits always attract delays.
