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How can you reduce your taxable income?

By strategizing properly, you can reduce your taxable income. Every one of us wants to reduce our tax burden. People who want to pay off their debts faster can do so by lowering their taxable income. Here are the common ways that can help you in lowering your taxable income:

  • Salary sacrificing – By salary sacrificing, we mean that a taxpayer can keep a small portion of his pre-tax income for a benefit like motor vehicles or superannuation before they are taxed. So, you can let go of a part of your salary before you get it. You can use your salary sacrifice to pay for buying new insurance, car, computer, mortgage, rent payment or other benefits. The benefits are also called ‘fringe benefits and can help you save a lot of money every year. 

However, you have a limit on this, and fringe benefits tax can affect the benefits that you get from your employer. 

  • Keep financial records – Today, ATO asks more questions on tax deductions. You will need to show them the tax deduction receipts on the claims if they ask for them. So, if you don’t have a great filing system, you will have to suffer a lot of trouble during filing taxes. Many people miss tax deductions just because they lack bookkeeping in Adelaide. 

Some people think if they need to keep track of each deduction, one of the best things that you can do is to keep the deduction receipts to satisfy all the queries of ATO. You should not complicate the record keeping. You should try to take out ten minutes from your schedule to update the logbooks and download the statements. You should keep all the receipts where you can conveniently access them. This will help you in saving time while filing the tax at the end of the year. In addition, this one habit will help you pay less tax.

  1. Claim all the deductions – People sometimes miss small deductions, but at the end of the year, they can help you save a lot. So, if you have spent money on anything that boosts your income, you should claim it. If you are not sure whether you can claim the purchase of a particular item as a work-related tax deduction, then consult your tax agents. 
  2. Charity and donations – Any donation that you make to the registered charity that is greater than 2 dollars help you save taxes. You will get a receipt after you have donated. Once you are filing your taxes, add those receipts to the specific section. However, you should know that the donated amount doesn’t come back as a refund. The amount is deducted from the total income that is taxable. 
  3. Health insurance – When you don’t have private hospital insurance, and you make 90,000 dollars every year while being single, then you will have to pay a minimum of one percent Medicare levy surcharge. This is collected in addition to the compulsory two percent Medicare Levy that every taxpayer has to pay. Depending on your medical history and needs, you can consider getting private health insurance to reduce your taxes.
  4. Reduce capital gains – You have to pay capital gains tax when you sell any assets like property or shares. If you have held the investment for a year, you will be charged 50% capital gains tax in addition to the marginal tax rate. Capital gains tax is paid in the same year when they are realized. However, you can carry forward the losses. You can also prepay the expenses on investments up to 12 months in advance. You don’t have to pay taxes when the property that you have sold is your principal place of residence. 
  5. Prepay Expenses – When you pay in advance for expenses related to income, you can lower your total taxable income by forwarding the deductions to the coming financial year. All the prepaid expenses should be less than 1,000 dollars or should meet the rule of 12 months for prepaid expenses. 
  6. Tax rebates – There are a few tax offsets from which you can benefit when you meet specific requirements. These tax rebates can reduce your tax bill, but you won’t get a tax refund. 
  7. Tax agent –A professional tax agent can help you in saving a lot of time when it comes to filing tax returns in Adelaide. They are experts and have knowledge about refunds and taxes. So, you can get the largest tax refund with their help. 

Paying taxes can be complicated, but things can get nasty for you if you try to fudge with numbers or break some rules. ATO will look into even the smallest tax deduction claims if they look suspicious, so make sure you follow all the rules. 

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