How can i reduce my taxable income in 2019?
It’s never too late to go to a tax agent and prepare all the necessary forecasts and start planning your finances effectively.
The financial year end is a time period which scares every taxpayer, primarily because the time to file your income tax return is on the round. While you file your income tax return, you do certain preparations like collecting receipts for your expenses, keeping your necessary documents in place, consulting the tax agents for taxation matters, etc.
However, you also need to know that this period is also crucial for another important thing; tax planning. The earlier you start planning your tax, the lower taxes you pay at the end of financial year. Tax Planning not only helps you minimize your taxable income, but it also helps reduce your financial risks, thus stabilizing your financial conditions throughout the year.
The first step to tax planning is reducing your taxable income while planning your income and expenses properly, to attract less taxes and more money in your favour.
Following are some basic tips to be considered before you file your income tax return 2019, in order to reduce your taxable income:
- CLAIM ALL THE DEDUCTIONS YOU ARE ELIGIBLE FOR
This is one of the basic things you can do. Not many of the taxpayers are aware of the deductions they are eligible for. It’s high time that you realise what eligible deductions you have been missing out on and claim these deductions to reduce your taxable income.
- CONSIDER TAKING FRINGE BENEFITS
How would you feel if you get something extra, complementing your salary from your employer? That’s what a fringe benefit is all about. The best part about such benefits is that you get to enjoy a little more with some more perks in the form of gym memberships, coffee bar vouchers, free food, etc. while your employer pays taxes on such benefits.
- CONTRIBUTE MORE TO SUPERANNUATION FUNDS
Contributing to the superannuation fund till you exhaust your limit for the same, can gain you more benefits on contribution to such funds.
- KNOW ABOUT INCOME PROTECTION
You certainly don’t want your income to come to a standstill if you ever have an accident or a major illness. Income Protection Insurance pays benefits to the taxpayers who get incapacitated due to an unforeseen health hazard.
- KEEP RECEIPTS OF EACH AND EVERY TRANSACTION
Be it any transaction of any nature, keep a copy of an invoice, or an acknowledgement receipt for them. Why? So that when you realise you can claim deduction for them, you can keep your related documentation ready in support of your claim. And BINGO! You save money in your taxes, right there!
- FRANKING CREDITS
When an Australian company announces fully franked dividends, the taxpayer can claim deduction against their taxable income for the tax that the company had already paid. Franking credits helps taxpayers reduce their income tax on dividends.
- AVAIL CLAIMS FOR WORK-RELATED TRAINING COURSES
Did you undergo a training during your employment to improve your present employment skills? You can claim deduction for the expenses borne in relation to this training.
With such a benefit by your side, will you say that learning new things is an expensive affair?
- NEGATIVELY GEARING YOUR PROPERTY
Negative gearing of your property in other words is generating tax losses which comes from tax-deductible costs that are higher than investment income.
- APPROACH A REGISTERED TAX AGENT
Wasting time by planning your income tax and financial position by yourself, will lead you to paying more tax and leaving you unaware about the benefits you are eligible for as a taxpayer. Approaching a registered tax agent will help you plan your tax effectively and save money for all the other things you have been eagerly waiting to purchase.
- DONATE MONEY FOR SOCIAL CAUSES (CHARITY)
They say it right; charity begins at home. Donating money for social causes or charities will benefit you with a tax deduction. However, make note of this; the voluntary charity should be made in monetary terms and shouldn’t be made for giver’s direct or indirect material benefit.
- TAKE TAX OFFSETS INTO YOUR BENEFIT
Here’s another way to save more money on taxes. Tax offsets are often related to tax rebates and are applicable after all your tax obligations have been calculated. They are available for people who are:
- Low/Middle income earners
- Receiving Government benefits
- Pensioners and older Australians
- Private health insurance owners
- Staying with a dependent relative
- PRE-PAY CERTAIN EXPENSES
Want to buy a much-awaited cutlery set for office kitchen? Want to buy a new air-conditioner for your office? Bring forward all your heavy expenses that were otherwise waiting for the next year. The result? It’ll lower down your taxable income and can possibly bring you down to a lower tax bracket. And ultimately, you’ll save your taxes.
- CLAIM THE DEDUCTIONS FOR DEPRECIATING ASSETS
If you are a small business, you need to hear this; you can claim deduction up to $20,000 for all eligible assets that are in use or installed for use in this financial year.
The good news is that the limit of $20,000 can be used for as many depreciating assets as you wish.
- SACRIFICE YOUR SALARY WITH OTHER BENEFITS
Don’t be scared. We aren’t advising you to lower down your salary package. Sacrificing your salary in this case, means to utilize a part of your agreed salary on certain benefits. This can be done with your employer. Reducing your basic pay and shifting your other salary income to benefits like loan payments, health insurance, childcare fees, etc. will lower down your overall taxable income, which will in a way save you money.
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This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual. To have your tax case assessed please contact a registered tax agent.