There are a number of ways an employee can minimise their tax bill. If you are an employee, this blog may be useful to you as it will cover some of the ways you can save on tax.
1. Keep Records of All Work-Related Deductions
The most simple and obvious way to reduce your tax bill, is to keep all receipts for any work-related deductions you may have. This can include costs related to a motor vehicle used for work, computer equipment, home-office expenses, laundry items, and any other expenses you are not reimbursed for by your employer. Be sure to keep an up-to-date logbook for a motor vehicle if this is something you intend to claim a deduction on.
Importantly, you must have receipts and records of your work-related deductions to be eligible to claim a tax deduction on your return.
2. Make Additional Super Contributions and Claim A Deduction
Many taxpayers find that a great way to reduce their tax liability, is by making additional payments to their superannuation fund and claiming a tax deduction. When doing this, it is important not to make contributions higher than the contribution cap, as this can result in paying extra tax. For the 2020-21 Financial Year, the concessional contribution cap is $25,000 and this includes any compulsory contributions already made by your employer for the year. See QSuper website for more information on claiming super as a tax-deduction Click Here
3. Negatively Gear Investment Property and Claim Depreciation
If you own an investment property and the costs of owning and maintaining the property are greater than the income you receive, you may be able to claim a tax deduction against your taxable income, for this loss. A negatively geared investment property can provide tax benefits, as you will be able claim a certain amount depending on your income and expenses related to the property. You can also offset the property’s decline in value from your taxable income, this is called depreciation. You can claim tax deductions on not only the value of the structure itself, but also any permanent fixtures such as ovens and dishwashers.
4. Donate to A Charity
Every donation greater than $2.00 made to a registered tax deductible recipient charity is tax deductible. Keep a record of all your receipts and add these up at the end of the Financial Year to get back a percentage of the donations made.
5. Claim Your Income Protection Insurance
You can claim the cost of any insurance payment made that covers you for loss of income. Keep in mind you cannot claim income protection insurance if the policy is held within your super. Also, income protection is not tax deductable if the policy compensates you a lump sum payment.
6. Get Private Health Insurance
If you are over the Medicare levy surcharge threshold, it may be worth looking into getting private health insurance. For singles earning more than $90,000 and families earning more than $180,000 per year, the cost of private healthcare may be less than the 1% levy surcharge you would have to pay anyway.
7. Timing of Capital Gains Income
With the property market booming, many people are selling their investment properties or thinking about doing so. If you are an individual and you hold an investment for more than a year before selling, your profit is usually considered a long-term gain and is taxed at a lower rate of 50%, instead of the full amount. Further, if you have capital losses from prior years, these can be offset against your capital gains to minimise the amount of capital gains tax paid.
If you are looking to sell your investment property it is best to first obtain advice around the capital gains tax liability and any strategies to help reduce the tax payable.
If you need further advice or information in relation to any of the above topics, please email us firstname.lastname@example.org or phone 07 5451 1118. We are always happy to help!