If you are new in Australia, you may not sufficiently know the taxation rules. And because of your lack of knowledge, you may become worried about losing a substantial amount of income in the tax. But, in reality, there is nothing to worry much about. Effective and strategic financial planning can help you save lots of dollars and enjoy your stay in this beautiful country. For example, if you correctly file an individual tax return, it will indeed help you reduce a considerable amount of tax.
Apart from this method, there are other efficient methods, too, like salary sacrificing, claiming tax deductions, using mortgage offset, adding to super funds, etc. Go through the following section to learn about these steps in more detail.
Here we give 10 easy steps following which you can effectively reduce your income.
One way to save tax in Australia can be salary sacrificing. You can put a portion of the pre-tax income toward a benefit before tax is applied to the income amount. A few typical salaries sacrificing benefits include superannuation benefits and motor vehicle benefits. You can use this method to pay for your brand new car, insurance, computer, mortgage payments, rental payments, etc. Another term for these benefits is ‘fringe benefits,’ which help many Australians save thousands of taxes each year.
Fringe benefits tax can affect the benefit types that employers usually offer. Your employer may provide you with a salary sacrifice for a car as a lease. An agreement will be signed between you, your employer, and a financer, using which you can get a new vehicle while minimizing the taxable income.
Currently, the Australian Taxation Office asks more questions compared to what they did a few years back. And when they ask you about the claimed tax deductions, proper receipts and bills must be shown as evidence. A large number of Australians make the mistake of not keeping all the records and lose the money that could have easily come into their pocket. But you shouldn’t be one of them.
Many business owners wonder whether they need to keep track of every business running expense. The best you can do is keep track of relevant deduction receipts. It will make your job smoother, and you can easily remember what expenses you can claim in your company tax return.
You may wonder what you can claim as a tax deduction. And the answer is, that you can claim anything you have spent for a purpose related to your business. You must make sure you declare every possible deduction to pay reduced tax. Even small and insignificant things can help you save a considerable amount when the financial year ends.
For example, if you use your office phone for personal purposes also, you can claim the money for the phone bills incurred for running the business.
If you are confused about what to include and what not to, you can take help from any tax professional. They can easily separate the business tax return from the personal tax return for you. It is a mandatory requirement for claiming tax deductions in Australia.
If you give donations to any registered charitable organization, which is more than 2 dollars, it can be deducted as a tax. After you have donated, you will receive a receipt from the organization. And when the tax season comes, you should use that receipt in filing your tax return.
Do you have a home loan? If yes, a mortgage offset account will allow you to offset the non-deductible interest on your home loan with interest on the taxable, standard earnings in a deposit. It will further let you open a savings account with the tender.
Once the concessional super contributions enter a super fund, they are taxed at a 15% rate. Different concessional contribution types that you can make include personal deductible contributions and salary sacrificing.
As per the government rules in Australia, a person with no private health insurance needs to pay at least 1% Medicare Levy Surcharge if he is single and earns more than $90000 annually. The same will apply to someone who has a family and makes more than $180000 annually.
Generally, most taxpayers have to pay a mandatory 2%, Medicare Levy. On the other hand, having a private health insurance plan will cost you less than 1% of the Levy Surcharge on the gross income, which is less in amount than the Medicare Levy paid without insurance. Thus, private healthcare can help you reduce substantial taxes.
Have you sold some significant assets like property or shares in the last financial year? Then those will be subject to a CGT. You must pay these taxes in the same year they are realised. If you make a prepayment for the deductible interest, payable taxes can be decreased.
If your property is a PPOR (principal place of residence), then it will be possible for you to claim the principal residence exemption from the house CGT. However, you will need to stay at that house to claim that exemption.
If you make some prepayments for some costs related to the income, your taxable income may also be reduced. The deductions will move to the next economic year, thus helping you get a higher tax refund.
For filing taxes, it is always recommended to hire a professional tax agent. The main reason is their deep knowledge and industry-specific experience that can help you get the most out of your tax refunds.
For filing a successful tax return in Perth, you can contact leading tax consultancy firms based in the city. They can assign you some of the best tax experts who can ensure the best possible result.