The financial year may have already reached its end on 30 June, and the new year has just begun. It’s the best time to know how you can minimise how much goes to your taxes. We will talk about six ways to slash your taxes:
Make a Contribution to Your Super
This first method is perhaps the easiest and quickest way to pay less tax. It actually entails salary sacrificing or salary packaging where you put some of your pre-tax income into your superannuation. The key step here is to make sure that you have already done so before you are taxed. So, the idea is to forgo a portion of your pre-tax salary before receiving it.
Salary sacrificing means that you’re swapping your income tax rate with your superannuation contributions tax. The latter is lower and usually 15% for most people. Therefore, if you expect that you will get an end-of-financial-year extra salary, you may want to put that money into your super instead.
Make sure that you set the salary sacrifice with your employer before the confirmation of your bonus entitlement. This detail is vital because salary sacrificing is only applicable to the future and not your past income.
Maintain Accurate Financial Records
You’ve heard it time and again from the ATO and here at TaxReturn.com.au. It’s essential to have all your tax records in a safe place. That way, you can easily access them when they’re needed, specifically when claiming deductions. This method may seem so simple but don’t skip it. The ATO has become more inquisitive than ever when it comes to tax deductions. The last thing you want is to lodge a claim and end up with no proof that you deserve the deduction.
Keeping a record of your financial documents does not have to be complicated. Just spend about 10 minutes every week to log your expenses, download statements, and have your receipts in one folder.
Here at TaxReturn.com.au, you can add pertinent documents by uploading them, leave your tax return, and come back at a later time. It’s that easy!
Claim All Your Deductions
Thousands of Australians don’t claim their deductions, missing out on the opportunity to save each year. That means the ATO gets millions and millions of dollars, which the citizens could actually get in their tax refunds. One reason for this is that they don’t keep financial records. They also think that their expenses are pretty insignificant, which are acceptable to lose as deductions. But the reality is that those small amounts can add up and become huge savings once you get to the end of the financial year.
So, if you spend money on anything relating to your job and how you earn your income, you should claim all the deductions you’re entitled to. The first step here is to ensure that you have declared all deductions, which is crucial to pay less tax in Australia.
Don’t worry if you’re unsure whether or not the item you spent money on can be claimed. Remember that you can claim it as long as it’s work-related and you have the receipt of purchase, which makes claiming so much easier. We also have guides that tell you what you can and cannot claim based on your profession or industry.
Be More Charitable
If you’re feeling charitable, follow your instinct. You’re not only helping organisations in making the world a better place, but you’re also saving some money during tax time. Every donation you make is tax-deductible, as long as they meet the following conditions:
- You have donated to a registered charity
- You have given more than two dollars
- You got the receipt from the organisation so you can file it away for the next tax season
During tax time, don’t forget to add the charitable receipts that you have and enter them into the “charity donations” section, which you can find in your tax return.
Before you get excited about tax refunds from your donations, you should note that contributions will not come back to you as a tax refund. What happens is that the gifts you have given to charities will be given back in the form of a deduction from your taxable income. Nevertheless, it’s getting a cashback from your good deed. It’s a win-win.
Pay Off Your Mortgage but Keep an Eye on Your Investments
Did you know that you can minimise your taxes using your mortgage offset account? It works if you have a home loan. With your mortgage offset account, you can offset your home loan’s non-deductible interest by taking advantage of the interest on the taxable earnings in a deposit. This arrangement permits Australian taxpayers to have a savings account with the lender. The difference is that you don’t need to pay the interest on the loan’s total amount. Instead, you will pay for the loan interest and get deductions through the money in your savings account.
Paying down your mortgage is excellent, and you get the bonus of not getting taxed on the money you just spent. This overpayment is even accessible through the redraw facility of your account. It’s helpful in case you require extra funds in the future.
Meanwhile, if you bought a property or have any investment, it can affect your taxes, either positively or negatively. Be sure that you understand the benefits and possible repercussions when investing your money. You should always talk to a financial planner, even if you believe you’re a skilled investor. Your investment should let you generate income now and in the coming years. You do not want to invest or not invest just to save a small amount of money from your taxes.
Know Which Income Amounts are Non-Taxable
The ATO has declared that some types of income are exempted, which means that they are not taxable. You want to make sure that those income types are not included in your tax return. Unfortunately, if you make this mistake, the agency will consider the non-taxable income when calculating tax losses from the earlier income years. It’s crucial that you deduct the non-taxable payments and adjust the taxable income of your dependents. Some examples of non-taxable gains include:
- Australian Government pensions like Centrelink’s disability support pensions for people who are younger than the pension age
- Payments and allowances from the Government, including child care subsidy
- Payments for the Federal Police or Australian Defence Force
- Specific awards, grants, and scholarships
- Education payments from the Government like allowances for students who are 16 years old and younger
The Australian tax system can be confusing, even for those who have been doing their taxes for years. That’s why you need expert advice and assistance. Let TaxReturn.com.au help you in lodging your tax return. We’re here to guide you so you can claim all your deductions and get your refund. Contact us for more information and start paying less tax today.