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If you are an individual in Australia looking to hand over as little as possible this tax time you are not alone. Especially if you are one of the 700,000 Australians whose fixed rate mortgage is due to go variable in 2023. If this is you, you will be more motivated than ever to minimise your income taxes and potentially pour this money into your ballooning loan repayments.
The first thing you should absolutely avoid, is playing silly buggers with areas of taxation that the ATO is knowingly targeting.
In the 2023FY the ATO is targeting:
Be extra vigilant with getting professional advice and keeping records related to these areas to avoid getting on the ATO’s radar, once you’re on their VIP list, you may never get off!
Reducing your taxes as an employee in Australia is hard, and high-income earning employees face the least favourable tax rates at 47% if you factor in the unavoidable Medicare levy.
Here are some options for reducing your taxes:
If you earn over $90,000 you should consider getting third party private health insurance with hospital cover to avoid the Medicare levy surcharge (Different to the regular medicare levy). You just want to make sure that the premiums you pay are lower than the medicare levy surcharge. Check out our deep dive article on this to work out if it’s worth it for you.
This involves giving up part of your pre-tax salary in exchange for a non-cash benefit, such as superannuation contributions or a car. Salary sacrificing can reduce your taxable income and, therefore, your tax liability.
Making payments to your super online with your after-tax money will allow you to claim a deduction for these payments. You have to watch out that you don’t exceed the concessional contributions limit of $27,500 for the 2023FY and that you fill out the notice of intent to claim and forward this to your super provider before lodging.
If you have not maxed out the threshold for concessional contributions into your superannuation, which includes regular employer contributions, salary sacrificed contributions and more, than you can carry forward the unused balance from the last 5 financial years into the current year and use this to increase the amount you can claim as a duduction on your tax return. Although great for tax purposes, you might want to talk to your financial advisor about whether this is the best use of your money considering your goals, retirement timeline and current net wealth.
Records of all WFH hours should be kept for the whole year. Many people also forget to keep receipts for work related outgoings such as small purchases from shops like officeworks or JB hifi. These all add up and can make a big difference come tax time.
For this tax year, Australians will no longer have the option to claim the low and middle income tax offset (LMITO) of up to $1,500, they will however still be able to claim the low income tax offset (LITO) of up to $700.
Finding a great tax agent who guides their clients on a case-by-case basis and helps them reduce their taxes by researching their field of work and related deductions can make all the difference to the final dollar value of your tax return. Your tax agent must be registered with the tax practitioners board. If they are also registered with a professional accounting body such as CPA Australia or CA Australia and NZ then that is an added bonus.
It's important to contact your tax agent before making tax related decisions.
If you would like to book a tax consult for your personal or business tax affairs, contact CTK Accounting through our website here.
