5 Great Tax Minimisation and Reduction Tips
With the financial year slowly coming to an end, now may be the time to start thinking about strategies for tax minimisation and reduction for the remainder of this year and planning for the next. As tax may be one of your largest expenses or outgoings, a priority should be trying to claw back as much as you can.
Whilst there are many different strategies available based on circumstances, the below 5 tips are fairly straightforward and most people should be able to utilise at least one if not more of them.
You should always consult with your accountant or financial adviser when thinking about implementing any type of financial strategy. The tips outlined below are in no particular order and can help with your tax planning.
1. Salary Sacrifice – If you are in a position to top up your super through a salary sacrifice. This is a good way to reduce your marginal tax rate which could be as high as 46.5% to a maximum super fund rate of 15%. A perfect strategy to reduce tax and boost your super.
2. Government co-contribution – Depending on eligibility, you may be able to participate in this government run initiative to help individuals increase their super savings for the future. Essentially the government will match you dollar-for-dollar to a maximum of $1000 of your personal super contributions. Visit the ATO Super co-contribution here.
3. Income Splitting – Moving investment income from the higher paid earner to the lower paid spouse or partner is an effective way to decrease overall tax liability.
4. Negative Gearing – Depending on your overall investment or tax reduction strategies, negative gearing may be a great option. The interest on loans for income making investments is a tax deduction. In addition, over a 5 year period you can claim any legal charges or bank fees associated with the setup of the loan.
5. Tax Offset – There are numerous tax offsets that you should be aware of. These reduce your tax payable. Tax offsets include; low income rebate, mature age worker rebate, medical expenses offset, education tax offset, private health insurance offset, super contribution offset, senior Australian tax offset, dependant spouse rebate.
The sooner you put together a financial strategy for your personal situation the better. Having a clear vision of what you would like to accomplish is the best way to reach your financial objectives. Minimising tax is only one piece of a strong financial plan and is a very important factor; after all, you work hard for your money and deserve to keep as much as you can.