OK I first will say that I am a newbie to property, so forgive my ignorance.
I’m thinking of doing this 15-15 tax variation thing. But intend to understate my expected rent for well mainly a safe margin for error, but also tax effectiveness. Perfectly legal of course. Say If estimate my rent as $100 / week for my 15-15 application and say I end up getting $150 per week over 12 months.
Now at the end of the financial year. I would have earned 52 times $50 being $2600 in extra income. Now if my net income is greater than estimated I’m told the Tax Office will fine you.
Thus, my strategy is to spend $2600 in amounts under $1000 a time say in the last month before the end of the financial year, to neutralize the effect of my income. Say I spend it on repairs etc.. or a depreciable item such as an air conditioner etc..
Now this way I see it as getting a bigger rebate from the tax office during the course of the year and then also using that extra rebate to go to a fund to spend on the unit for repairs near the end of the financial year.
Now tell me what you think of this idea ?
A Penny for your thoughts
sorry I didn’t hear that ! say again.
Hi hwd007.
Who told you that the ATO will fine you?
Why don’t check with th ATO directly – phone or use their website. Besides I believe that your 15-15 variation can be varied during the year.
TerryTerence McMahon
HomeWin
FinanceSounds way too complicated. In the end the 15-15 doesnt mean anything its your tax return that you will be assessed on. The 15-15 is an interim assessment which improves cash flow.
MJK
Hwd007
Yes – if you under or over estimate your taxable income the tax office may penalise you.
Your idea sounds like a bit of cash flow juggling… I guess it sounds ok but what happens if you don’t really have anything to spend the $2,600 on? You don’t want to put yourself in a position where you have to find things to do just to ensure your taxable income is on the mark. Furthermore, be careful and ensure that what you spend your money on is fully deductible and not a capital item that needs to be depreciated.
On the whole, I don’t think I like this strategy that much – no real gain. Why not put all this creative energy into thinking about buying better property – that will make you way more money.
BUT that’s only my opinion.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auOK I take all your points on board. Thanx! All valued information for me.
I guess my gist was u could improve your 15-15 cash position during the year meaning more cash to pay off your home mortgage faster, using your offset bank account. This is in addition to your normal repayments.
Then just prior to end year you neutralise the net income by redrawing on the understated amount and spending it on something useful either fully deductible or depreciable.
It don’t matter as the expense is really understated rent, so you getting perhaps a double bite of tax cherry benefit? Probably not worth the effort in juggling I expect.
Anyway I expect the tax department has probably already closed the door on such an idea by saying when your actual verses estimated rent position changes, the 15-15 must be varied promptly.
thanx for your inputs.
during the year.
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