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Pay As You Go

Pay As You Go Property Instalments


The need for investors to improve cash flow

It’s only natural that investors of property, like you, regularly assess your current position financially, and in most cases, seek available alternatives that help you improve the cash flow of your property investment.


More often than not, reducing tax liability in these situations is an effective strategy in increasing cash flow.

This is based on common deductions like interest, maintenance, and depreciation on a rental property. Capital works deductions rental property  also fall under this category.

When these deductions are maximised, cash returns also increase for property investors.

Instead of letting the current year pass before claiming these deductions, you, as an investor can actually reduce your tax payable throughout the current year. This can be done by utilising the PAYG or Pay-As-You-Go withholding variation.

The PAYG system explained

Paying-As-You-Go withholding variations, means that your deductions are claimed on a staggered basis, split into intervals spread over the year. The other alternative is get the full deduction, once only, when you prepare your annual tax return.

This method also allows your employer to reduce the rate of tax deduction against in your wages.

The flexibility of this scheme is an advantage to property investors, who as a result, would be able to access extra money within the year, allowing for cash flow to be managed more easily. The extra money earned can be also be used to decrease their liabilities with loans.

Depreciation’s Role

Depreciation, which is a non cash deduction, is a positive catalyst in using the PAYG withholding variation method as it helps reduce one’s taxable income. Remember that this deduction can be claimed without the investor having to spend on anything extra!

Investors like you can apply for this deduction by simply claiming whatever wear and tear your building and fixtures have that can serve as an evidence of decline in value over time. This is legal and allowed by the ATO.

To maximise this, you can organise a depreciation schedule immediately after the investment property is acquired. It is never too early for investors to maximise their returns through the PAYG system.

Let us look at a scenario that demonstrates the difference resulting from claiming depreciation in the first financial year, where the property calls for a typical depreciation claim amounting to $14,000. In this case, we have a two bedroom apartment within the city that was purchased for $500,000.

Note that fees for maintenance and repair, management charges, and interest mortgage payments are all included in the annual expenses.

No depreciation claim VS depreciation claimed* Without Depreciation With Depreciation
Purchase Price $      500,000 $      500,000
Rental income (p.a.) $        28,600 $        28,600
Less Mortgage (p.a. @ 6%) $        27,000 $        27,000
Less Property expenses (p.a. @ 1.5%) $          7,500 $          7,500
Less Depreciation 1st year $                      –   $        14,000
Tax Loss / Your Tax Deduction $      –   5,900 $   –    19,900
Annual refund based on 37% tax rate $          2,183 $          7,363
Monthly refund if applying for a PAYG variation $              181 $              613

In the example, we see the difference of $19,900 annually when property depreciation is applied under the PAYG system. Just by claiming depreciation, the property owner gains $613 in the pocket per month.

*This chart is to be used for illustrate purposes only. The above is based upon a borrower lending 90% of the purchase price, is a paying tax in accordance with individual tax rates and assumes no other investments. This is a cash flow only exercise and does not take into account entry and exit costs.

You Need the Expertise of a Quantity Surveyor

Applying for a PAYG variation requires you to present a property depreciation schedule which outlines all your property investment deductions in the present and the future. This is where you will need to obtain the help of a quantity surveyor.

Higher deductions in depreciation are amounts that need to be taken from an individual’s regular pay packet under the PAYG system.

Obtaining a depreciation schedule right after settlement is a smart move.

Filing for the PAYG variation with your accountant

Once your depreciation schedule is at hand, you will then need to file a tax return at the end of the year for the year to calculate the actual amount of tax liability.

Take note however that unless approved by the ATO, your employer has no power to reduce your tax rate.

In order to do this, you can download a form ( which allows the ATO to hear out your explanation of all your expected deductions in the coming year.

This form requires you to enter all basic information about you and your employer.

Further down the form you will see a deduction section where you will have to fill out with the interest that will be payable for you in the year ahead, along with rates and other deductions. This information is required by the ATO.

We recommend you carry out this variation with your account.


You can pay your tax in varied amounts every month or every week.

A PAYG variation can improve the cash flow of the property investor; we recommend you discuss this process with your financial advisor to see whether this strategy will be of benefit to your individual circumstances.