Now that I know the current recurring expense and income for my investment apartment (and making the assumption that interest rate remains unchanged, rent remains unchanged and 100% occupancy, rates etc don't rise -- all of which are assumptions likely to underestimate actual loss, given that it seems likely that rates etc. will rise with inflation, occupancy can only be less than 100%, not more, and that interest rates are more likely to rise a little more during this FY), I was able to lodge my PAYG tax variation for the 2023-24 tax year. The figures submitted were:
gross rent: $44,200
Interest: $56,610
rates/insurance: $ 2,867
agent mngt fee: $ 2,563
depreciation: $19,153
land tax/strate levy: $ 5,536
net loss: $42,529
Based on my marginal tax rate being 32.5%, this will reduce my annual taxable income by $42,529 and my tax liability by $13,822. So I should see an increase in my bi-monthly take-home pay of around $575. That will help meet the cashflow requirement for servicing my investment loan interest payments.
Hopefully by the time the interest only period on my loan ends in 5 years the rent will have increased more than the expenses (strata levy, insurance, land tax etc. Not by enough to cover the principle repayments, but by then I will be able to transfer my superannuation into 'pension phase' and the minimum annual pension payments should be more than sufficient to cover the loan repayments and possibly pay off some of the outstanding loan principle while I am still working full-time.
The reduction in tax rate from 15% to 0% on my SMSF balance when in pension phase should offset about 1/4 of the required pension payments, so won't affect my super balance at retirement too much. And will be offset by having increased equity in the investment apartment when I retire.
If I can pay off the investment property loan when I retire, the net rental income should be around $33K pa (in today's money). As my SMSF pension income stream not be taxable income, there should be very little (around $2,800) income tax due on my overall income stream during retirement (assuming current tax rules still apply).
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The ATO wrote back saying they couldn't process my withholding tax variation application unless I sent them a depreciation schedule. I've emailed them the depreciation schedule today -- it would have been nice if they had highlighted the need to send them when I filled in the online application! Hopefully they will now process the application and inform my employer to adjust the PAYG tax withheld from now on. Not sure why the ATO online variation form didn't specify/highlight the need to provide the depreciation schedule -- if I was a suspicious person I might suspect that it was a sneaky way to delay reducing the PAYG withholding for a couple more weeks, and then get interest on that money for a year or so until I finally get it refunded when I lodge my 2024 tax return.
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