Death and Taxes. We can’t do much to avoid the
first one but we can minimise the second one, by way of planning.
Legal ways to minimise tax!
Know your deductions
If you spend money in relation to your income earning activity, you will want to claim it on
your tax return. Not every expense is allowable deduction, but at the tax time, you wouldn’t
want to miss out on claiming something which is allowable!
If you are unsure whether or not you can claim a specific item as a work-related deduction,
simply keep the receipt of purchase and ask your tax agent when you do your tax return.
Contribute to your Superannuation
You can contribute to your superannuation up to $27,500 each year (including your
employer’s contribution) and can avail reduced tax rate of 15%.
Lets say, your income is $125,000 per year and if you contribute $5,000 from your salary
into Superannuation, you’d pay tax at 15% on that amount rather than 39%, saving you
$1,450.
Invest in yourself (training and learning)
You can get the best return on investment on investing in yourself in the medium to long
term. Not only that, tuition fees, training costs, books, costs of tools and equipment,
software etc. can be claimed as allowable deductions to reduce your taxable income, if
those training and courses satisfy certain conditions.
Chose who should own investments in family
If you have a spouse or in a relationship, its worth considering under whose name you
should invest in to save on tax payments. Investing in the name of lower earning partner
could save considerable amount as they would pay tax on lower rates.
But obviously, you need to consider other things as well, like asset protection along with tax
planning.
Plan when to sell assets
Any gains arising from the sale of assets are added to your income in the year of asset
disposal. So, if you already have more income in the current financial year, and you know
that you will have less income in the following year, then it's wise to hold off selling assets
until the following year so you can smooth out the tax impact due to capital gains.
No advise fits for all, so it is vital to get professional advice that is specific to your
circumstances and needs.
