One of the most important responsibilities of any individual who earns income in Australia, regardless of their citizenship, is lodging their annual income tax return.
For some Australian residents for tax purposes, tax bills can run high. However, there are ways to reduce an individual’s tax payable without resorting to tricks that blur the line between tax reduction and tax evasion.
Nest Egg recommends the following steps and articles to serve as a tax preparation guide:
Draw up a plan
Instead of waiting until tax season before getting their finances in order, taxpayers may benefit greatly from planning out their taxes in the beginning.
Nest Egg’s What is tax planning? discusses the importance of planning taxes, what makes it different from tax evasion and the different strategies that individuals may incorporate into their plan to maximise their tax deductibles and reduce their tax payables.
Learn the ropes
Trying to save on tax can be a difficult task because of the various confusing and complex rules and regulations enforced by the Australian Taxation Office (ATO). Even mistakenly leaving out certain information may already be considered as a form of tax evasion and may result in fines and legal prosecution.
The best way to avoid tax evasion is by understanding tax laws and learning all the concessions that Australian residents for tax purposes are allowed to claim.
Legal ways to reduce tax payable discusses the different tax deductions, offsets and strategies that taxpayers are permitted to use in order to reduce their tax payable.
It gives readers an overview of various tax concessions, how they work and the amount of money they can potentially save by properly applying government-approved concessions.
Tax benefits of different investment assets, on the other hand, serves as a guide for investors on how to reduce their tax by maximising their investments or choosing certain products.
For instance, dividend income from shares are generally taxed. However, shareholders may be exempt from taxation if they receive fully franked dividends. Shareholders whose marginal tax rate falls below the 30 per cent corporate tax rate may also request for a tax refund.
Consider investing in your partner’s retirement
Partnered or married high-income earners may be eligible for a limited tax offset when they voluntarily split their superannuation contributions with their low-income earning spouse. Doing so may give the contributing spouse a tax offset of up to $540 in their own tax return.
However, the actual amount may change depending on certain conditions, such as the receiving spouse’s income and the type of super fund they own.
Tax benefits of voluntary super contributions in behalf of spouse explains how the spouse tax offset works, the conditions for eligibility and the effective contribution limits that are enforced by ATO.
Seek help when needed
As previously mentioned, navigating tax laws can be confusing because of its complexities. Nest Egg recommends that individuals consider seeking professional advice before applying any of the strategies discussed in the articles above.