“She works hard for the money,” Donna Summer once said. Her song still resonates for most adults now. Although we do not want to share something that we worked hard for, we have to give some to the government. It is how things work and that is where tax minimisation strategies come into play.
Everyone saw the government on the move during the pandemic. Their productivity was the result of our taxes. But still, it is nice not to pay that much.
You can now legally avoid paying too much taxes. If you find this information interesting, pay close attention to this article. We will list the different ways to prevent yourself from paying too much tax lawfully. Here they are:
Increase Allowable Tax Deductions
Most accountants would advise you to increase your tax deductions. Doing so lessens your taxable income. As a result, it decreases your tax obligations.
One of these deductions is voluntary superannuation contributions. It allows you to deduct up to $25,000 annually. The maximum amount you can write off is called the concessional contributions cap.
However, do not confuse this tax write-off with the compulsory superannuation guarantee contributions. Your employer would file this one on your behalf. It also includes the concessional contributions cap.
Lastly, you must include income protection insurance. It comes into play when you are unemployed. It helps protect your assets (and your lifestyle to some extent) during this period. Most importantly, you can use it as a tax-deductible.
Improve Your Tax Offsets
Accountants would suggest improving your tax offsets. They are rebates you can use to reduce the tax you would be paying. The most common examples are the Low-Income Tax Offset and the Low- and Middle-Income Tax Offset.
Any tax agent would tell you that if it is possible, you should defer your income to a future year. Doing so may make you eligible for tax offsets as much as $1,080. That is already a good amount of savings.
Reducing Your Capital Gains Tax
If you ask your tax agent about Capital Gains Tax (CGT), she would tell you that it is all about timing. You should schedule the sale of your asset to use tax discounts. For example, if you hold on to a particular investment for at least a year, you are eligible for the 50 per cent CGT discount.
You should also note that the CGT is payable on the year that you signed the contract. The actual settlement date does not matter for this type of tax.
Buy Assets Under Your Partner’s Name
This scheme would be more profitable if your partner had a lower marginal tax rate than you. Doing this would mean that you will be paying a lower tax for the said asset.
If the investment is negatively geared, It should be under the partner who has a higher tax rate. The negative gear amount will reduce your taxable income. In other words, you will pay fewer taxes.
It is only fitting that we pay our taxes and on time, for that matter. But everyone still wants to pay a smaller amount. After all, as Donna Summer sang, we worked hard for our money. We should enjoy the results of our hard work when we can.
If you are looking for a tax agent who understands this principle, you should not search far. At Wardle Partners, we will be more than happy to help you with your income tax returns, business accounting, bookkeeping and help you legally lessen your tax liability. Contact us now for more information!