If the thought of filing your taxes feels like a nightmare, you may have been doing it wrong. With a few guidelines and some valuable tips, you can save a considerable amount of money by the year’s end. The benefit of putting in the effort is you get to reap the benefits and save yourself from potentially thousands of deduction dollars going down the drain. In this article, you’ll learn what tax benefits you’ve been missing out on, as well as common mistakes you need to avoid. Read on!
1. The Good Old Super
Your super is one of the most straightforward tickets to paying less tax. How this works is through a method called salary sacrificing. Salary sacrificing entails negotiating with your employer to package your salary into certain perks.
Salary sacrificing replaces the higher income tax rate on earnings with the lower superannuation contributions tax of up to 15 percent. Ideally, it would be best if you started negotiating the salary package with your employer before your year-end bonus is confirmed. This is because salary sacrifice can only apply to your future income, not previous ones.
2. Prepay Your Tax-Deductible Expenses
Prepaying your tax-deductible costs, such as the interest on an investment loan, might decrease your yearly tax liability. If you can pay some of your costs in advance, you won’t have to worry about them the following year, and you’ll be able to claim them as a tax deduction this year.
If you want to pay your tax-deductible costs in advance, the total amount prepaid should not exceed 12 months.
3. Maintain Up-to-Date Tax and Financial Records
The ATO is considerably more likely than it was a few years ago to ask many questions regarding your tax deductions. If they inquire about your deductions, you must provide them with the proper documents for tax deduction claims. Unfortunately, not having a sound filing system may cause a lot of problems around tax season.
To avoid this, set aside ten minutes each week to download statements and update your logbooks. Keep all receipts in a file folder or filing cabinet that is easily accessible, organised and simple to use. Not only will this make your tax season a breeze, but it will also put extra money in your pocket.
4. Don't Miss Out on Claiming Work-Related Expenses
You can claim anything related to your employment. If you bought anything half work-related and half personal, make sure you deduct the work-related portion of your expenditure.
If you’re unsure if the item purchased is deductible, save your receipt and consult with your accountant or financial consultant. To avoid missing out on any deductions, we always recommend keeping your receipts.
5. Invest Your Extra Cash in Superannuation
When considering ways to decrease tax, you should consider maximizing non-deductible (or non-concessional) payments. As a result, the more of your private wealth you can put into super, the less tax you’ll have to pay, so take advantage of the $180,000 yearly maximum on the amount you may put into super without receiving a tax deduction.
Once contributions are made to a super fund, earnings are only taxed at a maximum of 15 percent (or nil if you start a pension), giving significant tax savings over time owing to compounding.
The more knowledge you have about your taxes, the better your budgeting will be. When putting up your tax strategy, it’s highly advantageous to get financial advice from a tax-specialist accountant
Choose only the best accountants on the Gold Coast for your end-to-end accounting and bookkeeping needs! New Wave accounting understands the need to keep your finances in shape year on year. Book a free 30-minute strategy session today!