WEALTH HUB JOURNAL

6 Tips to Avoid Paying Too Much Tax

You wouldn’t pay more than the sticker price for a new home, so why would you overpay on tax? However, like many Australians without experience navigating the latest regulations, you’re likely giving the government more money than you should.

There are probably deductions you could claim today that you don’t know exist. At Wealth Hub Australia, our team of professionals will help you claim everything you’re entitled to. With accurate tax planning, you can reduce your tax liability and put the money you save toward building wealth, reaching financial independence, and setting yourself up for the retirement you deserve.

Wealth Hub Australia’s network of certified advisors will guide you through the complex and ever-changing tax law so you can put your finances toward your future. Let’s take a look at some tips you can follow today to be sure you aren’t paying more tax than you need to.

1. Deduct Your Donations

Any donation of $2 or more to a registered charity can be claimed if you remember to get a receipt—as long as you don’t get anything in return for your donation. Fundraiser dinners and raffles are not tax-deductible, and neither are gifts to friends and family. Likewise, donations to crowdfunding campaigns and social media platforms cannot be deducted unless they are registered deductible gift recipients (DGRs). However, large donations to charitable organisations can net you sizeable deductions come tax time.

2. Leverage the Medicare Levy Surcharge

If you don’t have private health insurance coverage but earn more than $90,000 as a single adult (double that amount for families), you may be entitled to a Medicare levy surcharge of 1%, 1.25%, or 1.5%. This is levied on your taxable income, reportable fringe benefits, and the amount on which you’ve paid family trust distribution tax.

3. Spring for a Salary Sacrificing Package

Salary sacrificing, also known as remuneration or a salary package, can shrink your tax liability significantly. Basically, salary sacrificing is where you avoid tax by you surrendering a portion of your gross pay for some type of perk from your employer. This practice can help you pay off property or go toward your super, but you should confirm with a financial expert that your arrangement is correctly structured, so you don’t wind up paying taxes on your fringe benefits.

4. Don’t Neglect Your Records

Accurate records let you back up all the deductions you want to claim. If you can point to receipts and other evidence of your expenditures, you have ground to stand on when you need to prove your eligibility. To maximise your return, don’t wait till tax time to start uncrinkling the receipts you’ve hidden around the house. By then you won’t remember what you’ve spent, and it will be a massive headache trying to get it all straight.

5. Start a Self-Managed Super Fund

 Self-managed super funds (SMSFs), taxed at 15%, can be structured to lower your tax liability. If you have a passive income stream and have entered into retirement, exempt current pension income may give you additional eligibility for tax exemptions.

6. Contribute to Your Spouse’s Super

If you meet certain age and income requirements, contributing to your spouse’s super fund can qualify you for an annual tax offset of up to $540. Learn more about the criteria here so you can check your eligibility.

Pick a time once a week, maybe five minutes every Monday, to update all your records of work expenses and sort your receipts so they’ll make sense to you when you need them.

Wealth Hub Australia can help you make the most of your tax exemptions so you can direct that money to your investments, your superannuation fund, or any other endeavor. Contact our team of professionals so we can discuss your tax plan today.

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