For many Australians, finding legal and effective ways to reduce taxable income at the end of the financial year can lead to significant financial benefits. Whether you're a professional, a business owner, or an investor, understanding the options available to you can make a substantial difference in your tax liability. Here are some smart strategies to consider.
Salary sacrificing or salary packaging a car
Salary sacrificing or salary packaging involves redirecting a portion of your pre-tax salary towards certain benefits such as superannuation contributions, cars under a novated lease, or even electronics for work use. This provides many tax benefits - not only does it reduce your taxable income but also helps you plan for the future or obtain assets in a tax-effective manner.
A novated lease for your car can help you to pay for the car’s expenses like fuel, insurance and registration using pre-tax contributions which can help reduce your income tax and is approved by the ATO! The novated lease has additional benefits including GST savings on the purchase price of the vehicle and its running costs to help you maximise your tax savings.
Try our free novated lease calculator to see what you could save!
An electric vehicle novated lease is the new government incentive to encourage Australians to go green. The electric car discount bill means you can pay for an eligible EV 100% pre-tax saving you thousands!
The electric car novated lease also allows you to save GST on the purchase price of both the vehicle and its running costs, giving you an additional 10% saving.
States and territories also offer electric vehicle rebates and incentives to encourage EV uptake. All of these electric car benefits are before the reduced cost of operation as you cut your fuel & servicing bill for your car.
See what you could save on your next EV!
Salary sacrifice superannuation payments
Making additional contributions to your superannuation is a wise strategy for reducing your taxable income. Contributions are taxed at a concessional rate of 15%, which is often lower than the personal income tax rate. This can be an effective way to save for retirement and build your retirement savings account while lowering your current tax bill. This strategy can help to grow your retirement fund and reduce your taxes.
The concessional contributions cap for 2023-24 is $27,500.
Learn more about ATO Superannuation here.
Claim all deductible expenses on your tax return
Claiming all your work-related expenses is a straightforward way to reduce your taxable income. This includes costs incurred for work travel, uniforms, home office expenses, and professional development courses. Remember, the expenses must be directly related to earning your income and you should always keep receipts or records.
Some tax deductions to think about when it comes to pay tax include:
Investment property tax deductions
If you own an investment property, you may be able to claim deductions for related expenses to lower investment income taxes. These include interest on loans, maintenance costs, property management fees, and depreciation. These deductions can significantly reduce the taxable investment income generated by the property.
Charitable donations
Donations to registered charities are tax-deductible in Australia. Not only do you contribute to a good cause, but you can also reduce your taxable income. Ensure you keep receipts of your donations to make valid tax deduction claims from such donations.
Manage capital gains to reduce your taxable income
Capital gains taxes (CGT) can be reduced through various strategies. Holding an asset for more than 12 months typically allows for a 50% discount in capital gains tax. Also, timing the sale of assets to align with lower-income years can reduce the CGT liability.
Purchase private health insurance
If you earn more than $90,000 per year and don’t have health insurance, the ATO will levy a Medicare surcharge of 1-1.5%, depending on your total income. You won’t be subject to this charge if you carry private health insurance (the cost of which could be much less than the Medicare levy surcharge).
Use a qualified tax agent to assist with any tax deduction
A professional tax agent can save you a lot of time when it comes to lodging your taxes. They also have inside knowledge and industry expertise on tax deductions and refunds. By hiring a tax agent to help you with your taxes, you’ll get the largest tax refund possible without running into trouble with the ATO.
Reduce your taxable income with easi
Reducing your amount of income tax paid in Australia requires strategic planning and a thorough understanding of the tax laws. By employing these smart strategies, you can effectively lower your tax liability while planning for your financial future. Always consult with a tax professional to ensure compliance and maximise your benefits.
No one wants to pay more tax than they need to. At Easi, our experienced team is ready to assist with tax planning and saving strategies. If you’re looking for strategies to save money, contact our team today to find out more about salary packaging and novated lease options.
