The ongoing high cost of living has many Australians looking for ways to keep more money in their own pockets and pay less at tax time. As tax season approaches, there’s no better time to explore financial strategies that could help reduce tax liabilities. By leveraging these financial tools and savvy techniques, it’s possible to save money while still being compliant with Australian tax laws. Read on as we share six effective methods to achieve this goal.
1. Use Salary Sacrificing
Salary sacrificing allows taxpayers to divert a portion of their pre-tax salary towards certain benefits. The most common salary sacrifice benefits are superannuation contributions, motor vehicles, and electronic devices. Salary sacrificing can be used to pay for a new car, computer, insurance, rent payments, mortgage payments, or other benefits, while saving thousands of dollars in taxes each year. Many employers offer salary sacrificing arrangements, so it's worth exploring this option with your HR department or financial adviser.
2. Keep Accurate Tax and Financial Records
Over the past few years, the ATO has tightened up on scrutiny, in particular in the areas of record-keeping, income and deductions, which is why maintaining meticulous records of income, expenses, and investments is so important when it comes to optimising tax deductions. Use digital tools and apps to streamline record-keeping and give yourself enough time to work through your tax return to avoid rushing and making errors. By staying organised and keeping track of deductible expenses, you can maximise your tax deductions and reduce your taxable income.
3. Claim ALL Deductions
Check that you're claiming all eligible deductions that apply to your situation. If you spend any money related to earning an income, investment properties, education or medical costs, you’ll want to claim it. Be sure to keep receipts and documentation to back-up your claims in case of an audit and consult with a qualified tax professional who can help you identify any deductions you may have overlooked in order to get the most out of your tax return.
4. Add to Your Super to Save Tax in Australia
Making additional contributions to your superannuation fund can be a tax-effective way to boost your retirement savings and reduce taxable income. Concessional super contributions, such as salary sacrifice or personal deductible contributions, are taxed at a lower rate within the super fund – a rate of just 15 per cent – compared to the marginal tax rate which could be as high as 49 per cent!
5. Minimise Expenses with a Mortgage Offset Account
A mortgage offset account can be a powerful tool for reducing taxable income while saving on mortgage interest payments. By depositing savings or having your salary paid into a designated offset account linked to your home loan, you can offset the interest charged on your mortgage balance. Not only does this reduce the amount of interest payable on your home loan, but it can also accelerate your path to getting debt-free.
6. Get Private Health Insurance
Investing in private health insurance provides valuable healthcare coverage and can offer some tax benefits too. Without private hospital insurance, if you’re single and earn more than $90k per year, or you’re a family earning more than $180k a year, you’ll pay a minimum one per cent Medicare Levy Surcharge on top of the mandatory two per cent Medicare Levy that most taxpayers have to pay. Basic private healthcare plans can cost less than the one per cent Levy Surcharge on gross income, so for some people, getting private health insurance makes good financial sense.
Maximising Savings to Reach Financial Goals
No one wants to pay more tax than they have to, which is why it’s so important to understand the key strategies for maximising savings and reducing taxable income. By implementing these six strategies, it’s possible to effectively minimise the amount of tax you’re required to pay, money which could go into your back pocket instead!
For more financial advice tailored to your unique circumstances, get in touch with the team at Mortgage Express.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
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