How to get a tax refund every paycheque
Are you one of those people who waits a year or maybe more to get a chunky ‘cheque’ back from the Tax Office?
I’ve never understood that - why would you let it keep your money for that whole time, when you could instead be saving lovely home loan interest (or just saving)?
There’s a magic little form on the ATO‘s website called a withholding variation. All you need to do is fill in one of these to receive a pro rata amount in your every pay packet… so your tax refund spread across the year.
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But before you do, ask yourself one crucial question: am I going to fritter these funds or use them to build my long-term financial security? If you honestly know it’s going to be the former, then as you were.
Perhaps for you a lump sum, that you can lop off your mortgage all at once, is a more appropriate strategy.
But if you trust yourself to use this strategy smartly – to put your money on your mortgage if you have one, or to invest it – then here’s what to do.
Step 1: Get the pay-as-you-go withholding variation application
The so-called e-variation is a downloadable, clickable form (you need to use Microsoft Internet Explorer).
You’ll be asked to put in your personal details, tax file number and, importantly, say by how much you want to reduce the PAYG tax withheld from the income paid to you within the year of application.
Yes, you will have noted – you’ll be asked to nominate an annual amount, for example, $2000.
Logically this should be roughly the amount of your average yearly refund. More in a mo.
Once you have input all the necessary detail, simply electronically lodge the form. (You can also request a snail mail version on the same page – form NAT 2026 – and if you have any difficulties submitting it online, the number to call is 1300 360 221.)
Step 2: Wait for word
If you file your application online via an e-variation, it should be processed within 28 days. If you do so by paper, it’ll be more like 56 days.
Step 3: ‘Guestimate’ how much extra you may receive
Now the last date for lodgement is April 30, which means you could get this year’s refund early over as few as one month of pays (allowing for online processing time).
But get forward planning for next year, too, so as you get some bonus backs in your bank account each and every month from then on.
Words of warning
The main reasons you may overpay tax throughout the year – and so end up with a refund – are if you will only end up working part of the year or if you have tax deductible expenses that will cut your ultimate bill. Your variation should be based on your expected assessable income (after deductible expenses) for the relevant year.
The main danger of actually reducing what the Tax Office collects over that year is that this won’t be enough and, after you submit your tax return, you’ll be hit with a shock tax bill. (Equally, if you know you have such a slug coming, you can do an upwards variation as a way of saving up for this liability throughout the year, as opposed to having to come up with the lump sum.)
So be conservative in your estimate… but don’t miss the opportunity – if it suits your money personality – to take back control of your money.
Nicole Pedersen-McKinnon is the author of How to get mortgage-free like me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.
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