When it comes to taxation, you can't avoid
paying taxes. However, there are some ways you can minimize the tax you are
paying through tax deductions. If you are on the lookout for a way to minimize
your taxable income, there is more to think about than tax cuts and
concessions. As a taxpayer, your investment plan should include smart tax
plans. To get more out of your investment strategy, below are four strategies
to reduce your tax.
Use Salary Sacrificing
For Australians, sacrificing your salary
opens a way for the employed to keep down the tax that you have to pay. The
taxpayer puts some of their pre-tax income toward a benefit before
taxation. Some common benefits of salary sacrificing are superannuation and
motor vehicles.
An employee forgos part of their pre-tax paycheck before they receive it. For instance, they can use salary sacrificing for the following:
●
Purchase a new car
●
Pay rent
●
Pay for insurance
● Mortgage payments
The above are some of the benefits of
salary sacrificing. The benefits are also called "fringe benefits" which save
Australians thousands of dollars in taxes yearly. There is a cap on what is
salary sacrificed, or salary packaged. However, the fringe benefits tax (FBT) may have an impact
on certain items that your employer is willing to offer you.
Keep Accurate Tax and Financial Records
Currently, the Australian Tax Office (ATO) will ask more questions regarding your tax deductions than they used to years back. If you're asked about tax deductions, you need to produce the receipts for the same. Unfortunately, you can have lots of headaches due to taxes if you don't have a sound filing system.
If you don't have a sound record-keeping
system, you'll be among the many Australians who miss out on deductions they
can claim legally. Record-keeping is not complicated. You can spend ten minutes
every week downloading statements and updating your logbooks. Ensure that you
keep all the receipts in an organised and easily accessible file folder or a
filing cabinet. You can use the services of Pherrus
Financial to handle all your needs regarding tax.
Managing Your Debts
Small debts can be a big problem if they
are not efficiently managed. You need to consolidate all your debts into a
single payment so that you can track them. If you have debts on mortgages,
credit cards, or investment properties, interest expenses are used in the reduction of
the income tax you'll pay.
Claim Your Deductions
Ensure that you declare all deductions so
that you can pay less taxes in Australia. What may seem to be
small and insignificant to you will amount to huge savings every year. For
instance, if you buy an item that you use at work and you sometimes also use it
during time off, you may still claim the amount you spent on it. This money is
known as work-related tax deduction.
Endnote
Sound financial planning and strategizing
reduce tax liabilities. For people looking into debt consolidation, you can
learn how to reduce taxable income by following the steps above. You will be
able to have more money in your pocket and pay your debts faster.
