“Many property investors miss this simple option, but it is a really easy thing to setup and provides a substantial financial benefit,” according to Jerry Collova, Managing Director of PEB Group.
“With an investment property, or any investment, most people usually wait until the end of the financial year and claim all of their deductions then.
“What a Tax Variation does is allow you to claim all of those deductions on a pro-rata weekly, fortnightly of monthly basis, depending on your pay cycle.
“There’s nothing complicated or illegal about it, it’s just a simple form you fill in and send to the ATO,” Mr Collova said.
It’s very straightforward although you will need your accountant or financial adviser to help you prepare the information and complete the form.
What you do is work out your depreciation and deductions for the year and then send the form to the ATO explaining that this is your new taxable income level and requesting a reduced tax variation to take this into account.
“The benefit of doing this is say for example you have a $12,000 tax credit for the year, if you get a tax variation for this it will reduce your monthly taxable income by $1000 and depending on which tax bracket you fall into it will leave more money in your pocket,” Mr Collova said.
“The smart thing then to do of course is to immediately use this money to pay down your mortgage and reduce debt.
“It works the same way as making extra repayments on your mortgage. The more repayments you make and the more often you make them, the less interest you are paying and the quicker you pay off the mortgage.”
And ultimately this improves your financial position quicker.
Click here to be directed to the ATO website and get started.
If you're looking for more ways to improve your cash flow, an appointment with our financial planner Rebecca Howarth is a great start.
If you need to know more about using a Financial Planner, read our blog on "The Right Way to Use a Financial Planner to Build Wealth"
Then book your appointment by calling 1300 187 894, the first consultation is free.
*This article is for general information purposes only. It is not intended as financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified and registered financial or investment adviser.
PEB Property Group is a complete financial planning advisory service for Perth families. Offices are located in Inglewood and Willetton, Perth, Western Australia and offer - Financial Planning · Finance Broking · Property Management · Real Estate Sales · Property Investment · Development.
PEB Finance is a trading name of PEB Brokers Pty Ltd ACN 604 784 401 | Australian Credit Licence 389510 | Credit Representative Number 476313.
PEB Real Estate is a trading name of PEB Real Estate Pty Ltd (Licensee) ABN 33 604 199 617 | Triennial Number RA70508. PEB Financial Planning is a trading name of PEB Group WA Pty Ltd ACN 142 958 254. Rebecca Howarth and Howarth (WA) Pty Ltd trade as
PEB Financial Planning. Rebecca Howarth (ARN 244928) and Howarth (WA) Pty Ltd (ARN 433328) are Authorised Representatives of NEO Financial Solutions Pty Ltd. AFSL 385845 | ABN 64 141 607 098.