Every earning individual is liable to pay taxes to the government. Everyone desires to save their hard-earned income and save more. It is not possible to fully avoid paying taxes to the government but you can find some ways to reduce it. Keep reading to learn about a few ways to reduce your tax liabilities in Australia.
Salary Sacrificing
Salary sacrifice is one option for people looking to discover how to save tax in Australia. This is often referred to as “salary packing,” and it operates in a variety of ways. Salary sacrifice is when a taxpayer contributes a portion of their pre-tax income to a benefit before being taxed. Motor vehicles and superannuation are two of the most prevalent salary sacrifice perks.
As a result, an employee would forego a portion of their pre-tax compensation before receiving it. They could employ income sacrifice to pay for a new car, computer, insurance, rent, mortgage payments, and other advantages, for example. With a few exceptions, these benefits are known as “fringe benefits,” and they can save Australians thousands of dollars in taxes each year.
Maintain Accurate Tax and Financial Records
The ATO is significantly more likely than it was a few years ago to ask a lot of questions regarding your tax deductions. You’ll need to show them receipts for tax deduction claims if they enquire about your deductions. Because of a lack of good record-keeping, many Australians miss out on deductions they are legally entitled to. If you make this error, the ATO will take your hard-earned money that should have remained in your pocket.
Keeping track of deduction receipts is the greatest thing to do when it comes to claiming deductions and satisfying the ATO. Each week, set aside ten minutes to download statements and update your logbooks. Make sure you save all of your receipts in a file folder or filing cabinet that is easily accessible, organised, and simple to use. You can consult a financial planners Perth if you find it difficult to overview your records frequently. Maintaining precise tax records will save you time hunting for documents at the end of the fiscal year, and you’ll be able to claim deductions and pay less in taxes as a result.
Claim All Deductions
You should claim any money you spend on anything that has to do with earning money. To pay less tax in Australia, make sure you declare all of your deductions. Even seemingly tiny details might add up to big cash savings at the end of the year. For example, if you bought something for work but also use it on the weekends, you can still deduct the cost as a work-related expense.
Keep the receipt of purchase and ask your tax advisor when you file if you may claim a specific item as a work-related tax deduction. It’s always preferable to save receipts and not be able to claim an item than to discard them and lose out on tax savings.
Add to Your Super (or Your Spouse’s) to Save Tax in Australia
Once deposited into a super fund, concessional super contributions are taxed at 15%. This is in contrast to being taxed at a marginal rate, which can be as high as 49 %. What are the various sorts of concessionary contributions available to you? To reduce your taxes, you can make the following concessionary contributions:
- Sacrificing your salary
- Contributions that are tax-deductible
- Salary sacrifices are not subject to income tax.
Contributions to superannuation can be made by self-employed or unassisted taxpayers, and they can receive a full tax deduction.
Read more: What Is A Company Tax Return? How An Accountant Helps A Company
Get Private Health Insurance
This is something you should only do if it makes sense. If you don’t have private hospital insurance and make more than 90,000 dollars per year, or more than 180,000 dollars per year as a family, you’ll have to pay a one per cent Medicare Levy Surcharge.
Basic commercial health insurance policies can cost less than the 1% Levy Surcharge on your gross income, which is less than the Medicare Levy you’d pay if you didn’t have insurance. Private healthcare may be worth it for some people in order to save money on taxes. Depending on your circumstances and medical history, private healthcare may also be worth it because of the frequently lower wait times.
Meet ATO Deadlines
If you register with a tax agent, you can file your tax returns as late as May of the following fiscal year, as long as you are not in a dispute with the IRS. All other returns must file by October 31. Avoiding problems and penalties can be as simple as meeting all ATO deadlines. Self-employed people with straightforward finances and circumstances usually file their taxes online with the IRS. Your previous year’s return, any information provided by your bank, workplace, government agencies, and other sources, will be entered into the account. This information is collected by the Tax Office until the beginning of August, so you’ll want to wait until then to file your return online.
Use a Tax Agent
When it comes to filing your taxes, a professional tax adviser may save you a lot of time. They also have insider tax and refund information and industry expertise. You can earn the highest tax refund possible without running to the ATO if you hire a tax accountant Perth to assist you with your taxes.
Lowering your taxable income and receiving a refund at tax time can help you keep more money. It is helpful if you’re learning more about credit repair and trying to minimise debt. Instead of surrendering that money to the IRS, you can put it towards debt repayment and credit repair.