PAYG Variations

The Australian Tax Office 


assists the investor


When a property is negatively geared, and tax rebates calculated, the investor has the option to either collect the credits progressively over the year or to wait until the end of the financial year and receive the refund then.

Which option you choose will depend on your circumstances, cash flow, fiscal discipline and preferences.

The Australian Tax Office provides online access to submit a variation, though relying on professional assistance is recommended.


If cash flow is not an issue, perhaps for a first or second property purchase, the investor can elect to hold off and wait until the end of the financial year to receive their entitlements.

In the case below, the investor decides to carry all the costs of ownership and wait until the end of the financial year to collect their rebates, in a lump sum or offset against other tax outstanding.

In this case, what would be due from the ATO is foregone and carried by the owner until the EOFY. The out of pocket or holding costs, therefore, are more substantial pay by pay.

This constitutes forced saving. Remember the opportunity cost! Covering the expenses along the way will prohibit some discretionary spending, but that may be a beneficial strategy for those who struggle with delaying gratification!

You are effectively giving the tax office an interest-free loan of your money!

The alternative is to collect the tax rebate entitlements each week (may also be fortnightly or quarterly depending on the investor’s pay period).

The pay office takes less tax out of each pay in line with an Income Tax Withholding Variation form submitted to the ATO.

As an example, if your accountant calculates that you will be entitled to a $7215 rebate at the EOFY, you can elect to have $138.75 ($7215/52 = $138.75) less in tax withheld. Your pay office adds that to your pay instead of remitting it to the ATO as they usually would.

Effectively you end up with more in your pay packet, but the ‘extra’ $138.75 must be directed into the account from which your property investment expenses are paid.

Your accountant is best equipped to submit an Income Tax Withholding Variation. The ATO imposes strict tolerances around how far out you can be when estimating what you are entitled to collect. Their limit of a discrepancy is usually no more than 10%, so it’s best to have a professionally prepared estimate lodged on your behalf; otherwise, penalties may apply.

Collecting your rebates pay by pay assists with cash flow and may become more important as your portfolio expands or perhaps as your life circumstances change, for example, an addition to the family.

The example below illustrates the situation where rebates are collected pay by pay and the investor’s contribution is subsidised week by week so that they now only have to find an extra $25pw to hold the property.









Investor Mindset

“Life rewards action, not inaction.”


Be careful what you wish for! The media is full of stories about people who have won money in the lottery and have not only lost it all but ended up in a more unfortunate situation than they were in before the windfall. Without the right mindset, it can be a house of cards!


What these people were missing was education and obviously any ability to postpone gratification!

Told you it was necessary!

A sensible decision would be to eliminate any debt and satisfy some basic needs – perhaps the car needs replacing or a home? But none of these so-called  ‘winners’ seems to have any inkling that they could invest the winnings and live off the interest or rent earned and retain their capital.

What they lack is the investor mindset – immediate gratification is driving them, not financial discipline or long-term goals. They could make the winnings work for them for a long, long time with just a little restraint and planning.

Opportunity doesn’t necessarily equal success, but it can.

According to Steven Covey, author of The 7 Habits of Effective People, the number one habit is Be Proactive – make decisions to improve your life through the things you can change.
Abundance isn’t finite, there are opportunities for ordinary Australians to create wealth, but you need to know about them and be prepared to act on them!

It comes down to knowledge and attitude.

That attitude is an INVESTOR MINDSET

1. The decisions you make need to be of the head and not the heart!  They need to be made after due diligence and based on the balance of evidence.

2. When it comes to property investing, too many focus on their ‘own backyard’.

Australia is a big place, and as we will see later, there is no one property market as such. There are a collection of markets, some growing, some stalling, and even within those, and there is varying demand for different types of property.

These variations are a result of the fact that supply and demand for housing is a function of a wide variety of economic and demographic drivers that can vary from one state to another, one town to another, and one house type to another. The best location and type of property is the one that stacks up dispassionately, based on the figures that suit your circumstances and goals.

3. You don’t need to be looking over the back fence either. Expert property management is crucial, particularly as your portfolio grows. Managing the property is the property manager’s job, you do your job, and they do theirs. Property management fees are tax-deductible – just another cost of ownership.

4. Similarly, the investor should not be overly concerned with the design and decor of an investment property. Too many people imagine themselves living in the property. While it’s essential to have plans that meet demographic changes, investment product is built with the tenant in mind. What appeals to the tenant market is what counts and also what maximises the market on resale.

The same goes for the inclusions in a property. Is it worth spending thousands on upgrading a property’s interior for rental? Some things are commonplace and expected, such as air conditioning, window coverings and hard floors in high traffic areas, etc. But any quality offering will include those things – complete turnkey means that the tenant just needs to move in with their furniture and start living – the investment is basically  ‘remote control’.

Going beyond that is something that can be done as part of an exit strategy, many years down the track if necessary. Don’t pay extra interest on an upgraded inclusions list for twenty years, instead, spend the dollars when it’s needed.

5. The property is an investment vehicle – an opportunity to generate income, build wealth for the future, and reduce your tax burden now.

6. Time in the market is more important than timing. Some people wait so long for the right time that they never make a decision – suffering ‘paralysis by analysis’. No activity in life is risk-free or opportunity cost-free, but it is a matter of prioritising your goals and then making a plan to achieve them and sticking to them.

7. Understand that psychology plays a significant part in most people’s decision-making. The herd mentality (FOMO) can lead investors to come in and out of the market because that’s what others are doing. Instinct is what makes us run at the sight of a lion; it’s logic that should override impulse and make investment decisions.

“Be fearful when others are greedy.
Be greedy when others are fearful.” Warren Buffett

8. The media too is responsible for a great deal of fear and confusion. Bad news sells, drama sells. Investors need to ignore the doomsayers; they come and go. Lack of consumer confidence, fueled by the media, the crowd, and sometimes their own family and friends (often those who have ever invested in anything) can often bring to fruition what the fear peddlers predict.

9. Successful investors gather a talent bank of support around them – Investment Property Advisor, Accountant, Broker, Financial Planner, Insurance Broker, Property Manager – all experts, trained and qualified in their specialty.

10. Understand those market corrections are inevitable – panic is not an option, nor is it a strategy! Business cycles are to be expected. Sometimes they are a result of macroeconomic policy by the policymakers via Fiscal Policy (the Budget) or Monetary Policy (interest rate manipulation by RBA), or even exogenous factors, outside of our control, such as a decline in commodity prices paid by our Asian trading partners or the current pandemic.

Property markets go through cycles and periods of correction too. Rapid appreciation in prices is often followed by a tightening of credit conditions and a softening in demand. It is essential to be prepared for these and to stay the course. Remember, it is the trend that is important.

11. Patience is a virtue! Property is not a get-rich-quick scheme.

12. Most importantly, Investors have the mindset that life rewards action, not inaction.




Building a Business for the Future

The world is indebted to Albert Einstein for his formulation of a simple, but brilliant algebraic equation that encapsulates the relationship between energy and mass. But he also had some useful day-to-day advice!

If you want to determine your future income and wealth, you need to be proactive now and invest in building your productive capacity, creating a larger pie, and raising the level in your own circular flow!

It’s not rocket science!

Investing comes in many forms, but it always involves making a choice and prioritizing, and delaying gratification.

It may be as simple as buying a book about efficient organisation which may deliver benefits within days.

Or, it may be a longer-term plan, like being a poor student studying for a degree for years while only working part-time or undertaking further qualifications while working full time and missing out on lots of family time now.

Or, it may involve putting some money aside (saving) and investing in shares or property.

The first strategy increases your earning capacity. The second diversifies and adds to your income stream (rent, interest & dividends) but also adds to your wealth (stock of assets) through capital gain over the longer term.

Wealth accumulation is the result of capital gain over time by investing in growth assets.

If the investment in earning capacity is directed to more wealth accumulation over time, it serves both objectives. Once again, the decision to save and not to ‘live to your income’ is a deliberate decision and choice.

A simplified example of building a business for the future is shown below:

Assume you desire a passive income of $2000 per week in retirement:

  1. Acquire a property portfolio of $2,500,000
  2. Long term hold – allow for movements around the trend
  3. DOUBLES to $5,000,000 (based on historical averages)
  4. SELL DOWN half to pay the debt

$2,500,000 at 4.5% rent yield = $2000pw!*

(*allowing for costs of ownership)

That’s the theory!

What it relies on is the capital growth component BUT

Capital growth CAN NOT be guaranteed.

Capital growth predictions can only be made on the balance of evidence.

All that can be offered in all honesty is above average opportunities  

Ethical, compliant, and educated professionals should not and can not offer you certainty and should be open about the fact.

Be guided by those who are honest and transparent about the assumptions on which they are basing their advice.

“The time is 

ALWAYS right

to do what’s right”

Martin Luther King