5 Ways to Reduce Your Taxable Income

Let’s begin with a positive; the taxes they levy are designed to give Australia the resources required to build an inclusive society for all. What’s more, the ATO gives us a range of opportunities which we can use to reduce tax in a completely legal and above-board manner. Take a look at our Top 5 tips for reducing your taxable income below.

Be Aware of What Can Be Claimed

It is well understood that Australian citizens and legal residents can claim a variety of different payments against tax. What many do not understand, however, is just how much can be claimed.

Basically, any expense related directly to your work or your business can be offset against your tax payable. This includes, but is most certainly not limited to, the following…

  • All vehicle running costs, where they are for business travel
  • Where a portion of your home is used for work purposes, the cost of running that home office
  • Work related mobile phone use ad where the mobile phone is predominantly used for business purposes, the cost of the rental and all calls
  • Were a laptop is used predominantly for business purposes, the cost of acquiring the laptop
  • Any education costs, where the education is related to your line of work
  • Were you live and work in a remote area, 50% of your home rent and utility bills

Keep records, stay aware of what you are spending on work or business, and make sure all of this is claimed against income tax. You are legally obliged to pay tax in Australia; you are not legally obliged to pay more tax than you are entitled to.

Invest in a Superannuation Fund

Using a superannuation fund to save towards retirement is common practice in Australia, but this is not the limit of the advantage such funds provide. They can also offer a way to reduce your payable tax. Investments in your super fund are taxed at a lower level than the standard income tax rate, and a co-contribution scheme can see your rewards grow even further. Leverage these strategies and reduce the amount of income tax you pay each year. Topping up your contributions to a complaint superannuation fund is an effective way to boost your retirement nest egg. What a lot of people do not realise, is that the younger you are when you start topping up your contributions, the more significant the growth is.

Give to Charity

Giving to charity is always a positive thing, and represents a major opportunity for us to give back to society and help some seriously good causes in the process. However, what you might not know is that it can significantly reduce your taxable income in the process.

Charitable donations are directly deducted from your taxable income. While this does not mean that the ATO will reimburse you for your contribution, it does mean that you will receive a percentage back in the form of reduced tax, while the entirety of your donation goes to a good cause.

Salary Packaging

Salary packaging is an effective way to reduce taxable income, and involves thinking outside the box when it comes to receiving payment from your employer. The bulk of an employee’s pay will always be received in cash benefits, which are taxed. However, these tax contributions can be reduced by receiving employment benefits in other forms.

These non-cash benefits range from Airline Club memberships Employee Share Scheme, packaging your negatively geared investment property, to the sorts of novated leases discussed below. Speaking with a salary package advisory, like the team at easisalary, can give you a clear picture of how your salary can be structured to provide optimal advantages for you and your employer.

Novated Leasing

You might not have considered a loan as a way to reduce your taxable income. That’s probably because, for the most part, a standard loan is not useful for this purpose. However, taking out a novated lease is a little different.

A novated lease involves a three-way agreement between an employer, an employee seeking to purchase a car, and a lease company. The lease company provides the employee with the funds they need to make the purchase, and the employer pays for the loan. The benefits are that the employee receives a serious income tax saving (and a new car), and the employer finds a tax-efficient way to reward their team or to increase salaries.

For more information on structuring your taxable income and getting the best out of your money, visit and speak to a member of their skilled service team.

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