How to save tax
As the End of Financial Year fast approaches, some of us will be having a big smile on our dial knowing that tax time means we can fund a holiday this year while others will be dreading the day they need to pay that hefty tax bill. Either way, maximising your tax return or minimising your tax payment is the aim of the game, and we have some ideas on things to consider. Side note- I am not condoning you spend your tax return on a holiday if you do get a tax return 😛
Firstly, I’ll briefly explain how tax time works for those people that are employed, as there is a lot of miss conceptions around this.
Every year for people that are employed, you will be getting paid net of tax; i.e. your employer takes your tax out of your gross pay and then you are paid your remaining income after tax. Gross Income less Tax = Net Income. Voila you have paid your tax and don’t need to worry about it until the end of financial year.
June 30th rolls around and you receive your PAYG Summary (previously know as your group certificate). Your employer will pass this on by 14th July and you are ready to start collating your expenses to claim to take to your accountant.
The best place to start is to not only by gathering your PAYG Summary but all your additional income sources ready to give to your accountant and these include;
- Bank interest
- Rental income
- Share dividends
- Trust distributions
- Government allowances (Newstart, Youth etc)
- Capital gains from sale of investments
Once you have all your income all ready to rock’n’roll it’s time to start collecting proof of all your allowable tax deductions, below will give you a great start on where to start looking for your expenses to claim:
- Motor vehicle expenses for work related travel
- Work related travel (taxi’s, Uber, parking, flights, public transport, tolls)
- Uniform costs
- Education costs (including books, fees, stationary, travel)
- Union and membership fees
- Sun protection including hats, sunscreen and glasses
- Tools of trade
- Telephone/ work related calls
- Overtime meal allowances
- Work related conferences
- Work related books & subscriptions
- Home office expenses
- Interest paid and fee’s charged on money borrowed for investing
- Rental property expenses including advertising, council rates, water, insurance, interest, management fees, repairs, maintenance, depreciation
- Donations (over $2)
- Income protection expenses
- Accounting/ Tax preparation fee’s
If you are looking for ideas on how to minimise your tax here are a few strategies that might be appropriate for a quick win and for long term tax planning;
- Personal deductible super contribution
- Setting up an Income protection policy; this is a tax deduction, but also can be a really smart Plan B
- Make a Spouse contribution to super for the tax offset
- Bring forward and pay tax deductible expenses in the Financial Year that it will benefit you
- Spread out the sale of investments with capital gains over multiple Financial Years
- Consider different types of investment structures such as investment bonds, super and trusts
- Private Health insurance rebates
- Salary packaging
The above ideas can have caveats and considerations that are not so straight forward, so before rushing a financial decision ensure you seek professional financial advice first to see if they are appropriate for you.
Let’s face it, no one loves paying the tax man so if you want more information on how to reduce your tax bill or bolster your return speak to the Pursue Wealth team about the above strategies or to hook you up with a killer accountant.