How can I reduce my taxable income?
Besides following the rules, complying with the deadlines, and keeping accurate documentation, there are many ATO-approved strategies you can apply in order to reduce your taxable income, which will maximise your tax return and will keep money in your account after your tax responsibilities.
Here are 2 ways to reduce your taxable income:
Salary sacrificing is a way of using pre-taxed income to your benefit. For example, you could arrange with your employer that any bonus to be received at the end of the year is paid directly as an extra contribution to your superannuation before the money is included in your paycheck. In that way, that extra income won’t be included as part of the taxable income.
However, it is important to consider that if the contribution caps are exceeded, the advantages won’t apply.
Know your income: taxable, non-taxable and tax deductibles
For this tax planning strategy, it’s important to know that some government pensions, payments and allowances are considered non-taxable income and that all the income remaining after applying the tax deductions is considered taxable income. This will save you the headache of including non-taxable income in your tax return and getting it mistakenly taxed.
In the same way, knowing the difference will allow you to do some tax planning to balance any extra income with more tax-deductible expenses. For example, if you’re expecting to receive a bonus at the end of the next financial year, you could program all your work-related expenses (such as the cost of a certificate required for your job or buying a new desk) after June 30.
Likewise, many people plan a donation to a registered charity organisation, to help those in need, and to get the benefits of a tax deduction in their tax return.
At Ample Accounting & Taxation Services we have specialised tax consultants who facilitate the process of maximising your tax return and create a personalised action plan. Call us or visit us in our Bankstown office and let us answer all your questions, not only during tax season but throughout the year.