Reduce your tax

4 simple techniques to reduce your tax

Here is a list of tips to help you minimise the amount of tax you pay this end of financial year:

1. Keep records

Even if you use an accountant to prepare your tax return, you are responsible for the information you provide and for keeping your tax records for a minimum of five years. So, to ensure that you don’t have to pay any more tax than you are obliged to:

  • Keep receipts of all your tax-deductible expenditure. If you are audited by the tax office, you will need to be able to prove the expenses were incurred.
  • Keep track of all your medical expenses. If net medical expenses relating to disability aids, attendant care or aged care exceed the threshold for the year, you may be eligible for a tax offset that takes the form of a credit against tax payable.
  • Keep detailed records of income and capital gains. Required details include date the investment was purchased, how much was paid, when it was sold and how much was received.
2. Claim all available tax deductions

You may be able to claim a tax deduction for many of your expenses. These include:

  • donations to registered charities or non-profit organisations;
  • self-education expenses;
  • premiums on income protection insurance;
  • work-related expenses.

You should bear in mind that the range of permissible work-related expenses varies widely from occupation to occupation. Refer to the Australian Tax Office (ATO) website for full details.

3. Contribute to superannuation

Contributions to superannuation can reduce the level of tax you would otherwise have to pay on your investments because super is taxed at a maximum of 15%. In addition, some people are eligible to claim a tax deduction for contributions made to super.

The rules surrounding superannuation tax deductibility provisions and contribution limits are complex, so it pays to seek advice from your financial planner.

4. Manage capital gains

When you sell an investment for a profit, you are considered to have made a capital gain. For non-professional investors, capital gains will be included on your annual income tax return.
Assets acquired before 20 September 1985 are exempt from Capital Gains Tax (CGT) considerations.

When you sell an asset for less than you initially paid for it, you make a capital loss. When your total capital losses for the year outweigh your total capital gains, you will finish up with a net capital loss for the year.

If you have a potential CGT liability, there are some strategies that you could consider to reduce the amount you need to pay:

a. Keep an investment for at least 12 months

Investors are entitled to claim a 50% discount on capital gains made on assets held for longer than a year. So, by holding on to the investment for more than 12 months you will halve the CGT payable.

b. Use carry-forward tax losses to reduce CGT

Capital losses incurred in previous tax years that have not already been offset against capital gains may be carried forward in future tax years and can mitigate the effect of any CGT liability. Check your past income tax returns or ask your accountant to determine whether this is an option for you.

Remember that this information is not personal tax advice. Always consult a professional adviser to help you determine the best strategies for your personal circumstances.


The information provided in this article is general in nature only and does not constitute personal financial advice.

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