Let’s face it no one likes paying taxes. We all have to pay tax at the end of the fiscal year or else the ATO will be looking to cuff your hands for refusing to contribute to the national kitty. You want good roads, welfare, and other social amenities right? You should, therefore, pay tax for these to be provided.
Paying tax however is an art. It should be done with a lot of maneuvers. I am not suggesting that you trick the ATO but you should do everything in your power to reduce your wage bill every year. There are numerous ways to reduce your wage bill legally and this is what we are going to focus on in the course of this article.
I have several ways in which you can significantly reduce your wage bill at the end of the year. All of these are completely legal and will not put you in any legal problems with the government.
1. Keep Exhaustive Records
It is very hard to claim deductions if you don’t have the respective records as evidence. The ATO will accept the claim of expenses you incurred in the fiscal year if they are well documented and legitimate. Keep all your formal and informal receipts and invoices and present them to the ATO when you are making your claims for relief.
Keep track of all your deductions. Opt for formal payments as they hardly lost or destroyed and provide for very solid evidence when pleading your case.
Keeping records is a habit. Start by keeping a record of all your transaction at the end of the week. Download statements, update your logbooks and file all invoices.
Do not delete electronic invoices such as emails.
There are even apps for record keeping which allow you to keep records in the cloud until you need them.
2. Time Your Expenses Properly
You should consider procrastinating some large expenses for the following financial year. If it is late in your current financial year and the expense can wait, you should wait and incur it in the following year. Why is this? If you think that your income in a certain year is going to be considerably smaller i.e. you are taking unpaid leave, you will save yourself from the tax you will pay for the expense.
On the other hand, you can also incur a large expense that is work related to increasing the value of your tax deduction. You should, however, do this if it is late in the financial year.
3. Pay Off Your Mortgage
Interest paid on a mortgage is tax deductible. You should, therefore, consider paying off your mortgage using money that is not tied to any expense such savings in a savings account. If you have a savings account with a considerable amount, the funds are certainly going to get taxed because of the interest that accrues on your savings. You can, therefore, use the funds from this savings account and payment of the mortgage on your house. This will not only reduce your mortgage loan amount but you will also exempt your savings from hefty taxing. Additionally, you will bring down your tax bill by paying off your mortgage.
Should an emergency beckon and you need quick money, do not worry as you are permitted access to the overpayment on your mortgage
4. Make A Contribution to Charity
This is another good way to bring down our tax bill. A contribution to a charity cause is tax deductible which means that if you made a donation of $50,000 to a recognized charity organization, you will be liable to deduct $50,000 from your tax bill.
If you have ever wanted to do a good deed, this is definitely a win-win situation for you as you will have your philanthropic quest quenched and made a huge cut on your tax bill.
5. Sell Loss Incurring Investments
Assets are subjected to Capital Gain Tax every year. If you own a depreciating asset or you just want to sell, you must consider how they are taxed. Assets that have been owned for more than twelve months are valid for a 50% Capital Gains Discount. Assets that are newly owned are subject to full Capital Gain Tax.
This means that you should sell your assets after at least twelve months to avoid paying the full Capital Gains Tax.
Moreover, non-performing assets such as depreciating shares are just a burden to your income as they still command tax. It is therefore wise to sell such assets.
6. Claim All Acceptable Deductions
One of the mandatories of every tax filing process is to claim all the deductibles that the ATO accepts. I started off by telling you about the importance of record keeping and this is where you will benefit from your avid record keeping.
You should claim all legitimate expenses that you incurred in the process of making your taxable income. These expenses can include;
- Seminar Fees
- Accommodation expenses
- Students Loan Deductions
- Work Related Equipment and supplies
There are many deductions that one incurs in the income production process. You can search online for a detailed list and add them to your tax deductibles.
The ATO even accepts deductions on expenses on items that are partially used for income generation.
Remember to deduct all fuel expenses for business purposes such as business trips.
7. Pay into A Pension Scheme
The government gives a tax relief if you save into a pension scheme in an effort to encourage people to save more for retirement. It is advisable to draw a plan with your employer on how to save for retirement and the government will give you a tax relief for the amount that you saved into a pension scheme.
8. The Super Spouse
If your spouse earns less than $40,000, you can make a contribution to their super fund from which you will be rewarded a tax offset of $534. However, once they start earning more than $40,000, the tax relief is no longer available. Be wise and channel a part of your income to your spouse’s super fund and you will reduce your wage bill by at least $500.
The following are the best ways for you to reduce your wage bill. Many of us usually find ourselves in trouble because we don’t plan early, for tax planning I would suggest website twaccounting.com.au. But remember that prevention is the best medicine let not ignorance make you be in trouble with tax regulation authorities.