The top 20 ways to reduce your taxable income in Australia

When tax time rolls around every year, nobody wants to give the ATO any more than they absolutely have to.

If you’ve been wondering how you can effectively lower your taxable income (which in turn means paying less tax), this is the article that’s an absolute must-read as we err closer and closer to the end of the financial year.

1. Salary-sacrifice super contributions

Chances are, your employer will offer the ability for you to sacrifice a certain amount of your income to be paid into your super account.

This means the money being paid into your super account is taken from your pre-tax salary, reducing your overall taxable income amount.

2. Additional salary sacrificing

Some employers also offer salary sacrificing for things like car leases, electronic devices, mortgage and rental payments. Speak with your employer to find out if they do.

As above, salary sacrificing means using pre-tax salary to make car/mortgage/rent, etc. payments, and therefore lowers taxable income.

3. Working from home? Know the deductions you can claim

If you have a work from home arrangement with your employer, you’ll be eligible to claim deductions such as electricity, internet and phone as well as equipment and furniture purchased that is used to perform your work duties at home.

4. Defer income until the start of the next financial year

When you’re close to moving up to the higher tax threshold but won’t get there if you can defer payments until after 30 June, request that this is paid to you as such.

5. Contribute to your spouse’s super

By contributing some of your own super (up to $3000) into your spouse’s superannuation account, you can claim a tax offset of up to 18 percent.

6. Open an offset account

Got a mortgage? If you haven’t done so already, opening an offset account means you can offset any non-deductible interest with the interest on the taxable earnings of the deposited money in the offset account.

7. Open a family trust

If you are a high income earner, opening up a family trust allows you to distribute your income to other daily members who are within lower tax thresholds.

8. Advance your education

Courses and other educational avenues that relate to your employment can be fully deducted from your annual taxable income.

So if you’ve been considering furthering your education through a professional development course or executive coach, it’s never been a better time.

9. Be aware of all claimable deductions

As everyone is different and has a different set of circumstances, it’s impossible to explain all of the deductions that are relevant for every single person.

Make sure you’re deducting everything you’re eligible to deduct if you want to pay the least amount of tax.

10. Submit on time

If you stay on top of things and have everything prepped and ready to submit on time, you’ll be in a much better position to have gone through and checked to make sure you’ve deducted everything you could.

11. Prepay expenses

For any eligible tax deductible expenses you’re considering purchasing in the next financial year, you can prepay and bring the deduction forward to the current financial year.

To do this, the prepaid expenses either must not exceed $1,000 or is a service that will stop sometimes during the next financial year.

12. Take out private health insurance

Avoid paying the Medicare levy surcharge by getting private health insurance cover. This can actually save you money depending on your income.

13. Donate to a charity

Provided the charity you choose is endorsed as a Deductible Gift Recipient (DGR) and you don’t receive anything in return (e.g. a raffle ticket), you’re able to deduct the entirety of your donation to them.

Always remember to ask for a receipt of your donation so you have proof it happened.

14. Check your eligibility for offsets

There are certain tax offsets that you may be eligible for which can help to reduce your taxable income. Be sure to review all of the available tax offsets that are available and determine if one or more are suitable for your situation.

15. Manage debt

By properly managing your debt, you can determine which are non-tax deductible and work to pay those off first, thereby leaving debts with the interest expenses that can be deducted from your taxable income.

16. Negative gearing

For those of you who have an investment property, should your total deductible expenses be higher than the net total rental income for the year you can use that loss to lower your overall taxable income.

17. Property depreciation

Another way for property investors to effectively reduce annual taxable income is through claiming property depreciation. Available to most properties generating income, this includes all items fixed to a property (curtains, etc.) inclusive of renovations.

18. Additional investment property claims

On top of property depreciation, property investors are also able to claim for expenses such as advertising the property, costs for gardening and cleaning and general upkeep of the property.

19. Be vigilant with all record-keeping

Keeping good tax records is something that needs to be done on an ongoing basis year-round.

If you leave it to the last minute to collate everything, it can quickly become an absolute disaster, so make sure you stay on top of it throughout the year to simplify the process at tax time and ensure you don’t miss anything due to a mad rush.

20. Speak with an accountant

A quality accountant who is well-versed in working with clients to reduce taxable income is worth their weight in gold. Plus, anything you spend on the consultations with them can be deducted from the following year’s taxable income.

Valles Accountants takes all the hassles out of tax time

Unfortunately, if you’ve waited until the 11th hour to implement most of the above methods to reduce your taxable income it may well be too late. Give yourself the best chance by speaking with the experts in tax minimisation at Valles Accountants today.

With more than three decades of combined experience assisting Australians to lower their taxable income, you can rest assured we’ve got the knowledge to ensure the best outcome for you.

Our friendly team can also assist with a range of other services including corporate advisory and consultation as well as superannuation compliance, deceased estates and much more.

Reach out to us to make an appointment on 03 8651 6999 or, if you’d prefer, send us an online enquiry and you’ll hear back from us ASAP.