There are many ways to minimise your tax in Australia. Here are 5 of the most popular methods:
Minimising your tax in Australia is easier because the Australian Tax Office (ATO) has a great tax break. In addition, there are various strategies you can use to reduce your tax liability without running into trouble with the tax man.
Most people who earn an income get a tax deduction for some of their expenses. For example, you can claim a deduction for your work-related expenses but not for travel between home and work if you’re an employee. Those trips can be claimed as deductions if you travel from home to different workplaces.
In the same way, there are many other ways to minimise your tax in Australia through legitimate means.
Salary packaging to minimise your tax
Salary packaging is a term used in Australia for employee benefits that allow employees to receive part of their salary in benefits rather than cash. The benefits can include items such as cars, housing, and travel. Salary packaging is sometimes called ‘tax-effective remuneration’ or ‘tax-effective pay’.
The main advantage can help you reduce the amount of tax you pay.
You can lower your taxable income by packaging salary and wage expenses and paying less tax. This can be done by salary sacrificing into a superannuation fund or by claiming work-related deductions.
If you are self-employed, there are several ways to minimise your tax. You can claim business expenses, use depreciation rules, and take advantage of capital gains tax concessions.
You can use several strategies to minimise your tax in Australia. The best strategy for you will depend on your circumstances. Speak to a qualified accountant or tax advisor to find out what strategies work best for you.
Claim all your work-related expenses
You can claim many things as a tax deduction on your tax return if you itemise.
But if you’re not yet itemising, you can do some basic things to maximise your work-related deductions and minimise the tax you pay.
The ATO’s data shows that more than 3 million individuals don’t itemise their deductions in Australia. That means they’re likely missing out on thousands of dollars in deductions every year and paying more tax than they need to.
When it comes to work-related expenses, there are two categories: expenses you claim without receipts (flat rates) and those that require receipts.
Expenses without receipts
If the total expense is less than $300, you can claim all reasonable expenses without receipts.
This might include your public transport costs or laundry for your work uniforms. The ATO provides a list of common claims here. These claims are based on reasonable estimates of what most people spend each year on these items.
Expenses with receipts
Some work-related expenses require receipts because they require more detailed information about the cost and its relation to your employment.
Invest in your super to minimise your tax
The Australian government wants you to be secure in your retirement, and if you take some simple steps, the taxman will help you save for your super and fund it for retirement.
Regardless of how well you plan, tax is rarely far from the surface. If you don’t understand how to manage your taxes, it can erode your wealth and make that retirement dream a little harder to reach.
So it may surprise you to know that the Australian government supports retirees who want to invest in property, shares and funds. They’ll cut your tax rate by up to 15% on earnings from assets owned by a super fund as long as they are held until after you turn 60 years old.
Super is an ideal way to invest because it is taxed at 15%, compared with rates up to 45% for wages and other income, depending on the size of your income bracket. That’s a huge saving.
There are also significant tax benefits for capital gains on super funds’ assets, such as property or shares. For example, if an asset has been held for more than 12 months, the capital gain is only 50% taxable in super rather than 100% for
Invest in property
Investing in property can help you minimise your tax. You may be able to claim deductions for the interest you pay on an investment loan, and for other costs you incur, such as property management fees.
If you decide to buy a property, make sure you take into account the following:
Capital gains tax
You’ll have to pay capital gains tax (CGT) on any capital gain made when selling the investment property.
The capital gain is calculated by subtracting the property’s cost base from its capital proceeds. The cost base includes:
- the purchase price
- legal fees, stamp duty and other costs of buying the property
- improvements made to the property (such as renovations)
- the cost of any capital improvements (such as building a deck or a pergola).
Investing in tax-effective investments
Investing in tax-effective investments is one way to minimise your tax in Australia. Several investment options are available, and each has its benefits and drawbacks. Different types of investments offer different levels of tax relief, so it’s important to do your research before deciding which option is right for you.
This information is general and has been prepared without considering your objectives, personal or business circumstances, financial situation, or needs. Because of this, you should, before acting on this information, consider in consultation with your adviser its appropriateness, having regard to your objectives, personal or business circumstances, financial situation and needs.