Ah tax time, the time of year when you start to think about the amount of tax you pay and how you can reduce it! Well tax deductions are certain expenses you incurred in order to earn your income. Deductions reduce your taxable income before the tax is calculated, therefore reducing the amount of tax payable. Hooray!
Here are some of the most commonly used deductions:
- Charity Donations
- Work related expenses
- Car & travel expenses
- Self-Education expenses
- Cost of managing your tax affairs
For a more comprehensive list of deductions you may be eligible for click here!
Handy Hint: Try to keep track of all your expenses throughout the year to ensure you do not miss out or forget about any deductions when tax time comes around. The ATO even have some great record keeping tax apps that can help! Find out more about these free resources here!
Tips to avoid getting a tax bill
If you find yourself dreading tax time every year, here are some steps you can take to reduce the likelihood of receiving a tax bill (depending on your situation):
- increase employer tax withheld– You can ask your employer to increase the amount of tax withheld from your pay. This is known as an upward variation.
- voluntarily make PAYG instalments– If you earn income as a sole trader or from investments, you can choose to make voluntary PAYG instalments.
- prepay tax– You can make tax prepayments any time to make it easier to manage your tax. Prepaid amounts are held by the ATO towards your expected bill, unless you or your agent request a refund.
- consider the impact of a capital gain– If you sell a capital asset for more than what you paid for it you will have made a capital gain. Consider the impact the amount and timing of the gain will have on your taxable income.
It is important to seek the help of a good accountant and ensure you get the right advice for your situation. Tax should not be a thing to fear, there are many legitimate ways to help reduce your tax and increase your savings.
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