When it comes to things you need to worry about, taxes are almost always one of them. There’s no escaping taxes, but that doesn’t mean that they have to take a toll on your mental health. A bit of planning goes a long way towards helping you save on taxes in Australia.
If you’re looking into debt repayment or consolidation, saving on taxes can be a huge help. Not only does this free up extra funds to go towards your debt repayment, but it also means less worry about your financial future. Though not the end of the world, the last thing you want to do during tax season is owe funds to the government. Keep reading for our best tips for how to save on taxes in Australia.
1. Keep Accurate Records
First, if you do nothing else on this list, make sure you do this. Keeping accurate tax records is the best way to ensure you’re not paying more than you need to. It’s recommended to use any and all tax deductions you qualify for, but the ATO is more likely than ever to follow up with questions. This means you need to have clear receipts and information about any deduction claims.
How can you keep track of your tax records? There are a lot of different ways, like using a receipt organizer or budgeting app. Get in the habit of taking 10-15 minutes per week to review your expenses. By making this a part of your lifestyle, it becomes second nature.
2. Claim Relevant Deductions
Speaking of accurate records, this is one of the best first steps for claiming the most deductions. If you spend funds on anything related to your income (home office, transportation, work dinners, etc), these can almost always be claimed as tax deductions. No matter how small, these savings add up and help you save on taxes in Australia.
Always keep receipts of anything you purchase related to work. This might include books, courses, event tickets, training, and more. When in doubt, work with a qualified tax or budgeting professional to make sure you’re making the most of your deductions.
3. Contribute to Your Super
Next, saving towards your super is a smart investment no matter the time of year. However, it’s especially useful when thinking ahead for tax season. Believe it or not, there is no income tax limit on salary sacrifices towards your super (or your spouse’s super).
This is also true for self-employed taxpayers. You can make your own contribution to your super for full tax deduction benefits. By saving ahead for retirement, you not only make sure you’re on track, but you also save yourself big time with taxes.
4. Get Private Health Insurance
Though not the right fit for everyone, private health insurance can help you save on taxes in Australia as well. In some cases, it makes more financial sense to carry private health insurance. For example, if you’re single and make upwards of $90k yearly or you’re a family making more than $180k combined, you pay the minimum 1% Medicare Levy Surcharge on top of existing healthcare taxes.
Compared to this, a private health insurance plan usually costs less than the 1% Levy Surcharge on income. This means you pay less in taxes each year. Additionally, private health insurance comes with benefits like shorter healthcare waiting times.
5. Consider the ATO Deadlines
Another tip you shouldn’t overlook is to pay close attention to the ATO deadlines. For anyone not registered with a tax agent, your tax return needs to be lodged by October 31st. You can usually do this online with the ATO directly, and it doesn’t always take much time at all.
That being said, if you miss the deadline, you run the risk of penalties and added fees. Though it can be intimidating to pay your taxes online, especially if you’re not sure how much you owe, this isn’t something you want to put off.
6. Exclude Non-Taxable Income
Finally, don’t include more than you need to when it comes to your income. The ATO doesn’t consider every type of payment as income. Some things are exempt from taxes, and that means you shouldn’t include them on your return. This includes:
- Certain government pensions
- Centrelink payments (carer allowance, childcare subsidy, etc.)
- Overseas pay for Federal Police and Australian Defence Force
- Education payments
- Specific grants and scholarships
- Lump-sum insurance payments
When in doubt, talk to a professional. A tax agent can help you work through what counts as taxable income for your situation so you don’t overpay more than you can afford.
Prepare for Tax Season
As frustrating as taxes can be, they’re a part of life. The more you learn about how to manage your own taxes, the less intimidating the process becomes. Whether you’re considering your financial goals or your income plan, follow these tips above to save on taxes in Australia this year and beyond.
Do you need help managing this year’s budget? From taxes to debt repayment, the team at Debt Busters is here to help. Schedule a meeting today to review your unique situation.