Many people panic towards the end of the financial year looking for ways to reduce their tax liabilities, but the key is to manage things well as you go, writes Coco Hou, Managing Director of Platinum Accounting Australia.
The reality is that there are a number of ways you can better manage your business affairs throughout the year to assist in reducing your tax liability at the end of the year.
Whether you are an individual, side-gigger, solopreneur, business owner, freelancer, start-up or larger business, there are some key things that you should do prepare yourself for tax time that will help to reduce the amount of money you have to hand over to the ATO.
Top tips to reduce your tax bill
Record work-related expenses
Be ruthless with yourself and make sure you record all of your work-related expenses so that you remember to claim them at the end of the financial year. Keep all your receipts,
Take photos of your receipts using apps like Hubdoc that integrate with cloud-based accounting systems such as Xero. These apps convert your receipts into data that is then uploaded straight into your accounting system.”
Make tax-deductible donations
We all support causes. Why not show your support and donate some funds to a charity organisation. For a donation to be tax-deductible, it must be made to an organisation endorsed as a Deductible Gift Recipient (DGR), and must be a genuine gift.
Make extra contributions to Super
Make additional payments to superannuation. This is only taxed at 15 per cent. But there is a limit on how much you can contribute without paying more tax and this is currently $27,500 per financial year.
Investment expenses can reduce your tax
Remember to claim investment expenses and your investment loss from the prior year as this can be carried forward to offset future gain.
Use a quantity surveyor to prepare a depreciation schedule for your rental property. This will ensure depreciation is captured and included in your tax return
A tax depreciation schedule is 100 per cent tax-deductible. This means you can claim the fee charged by the quantity surveyor as part of your tax return.
Pay interest on time
Ensure you make your loan repayments on time.
Capital gains discount
Utilise the 50 per cent discount on capital gains for assets you have held for at least one year.
For people who invest in crypto, if you’ve had the crypto for more than 12 months, you may be eligible to discount your capital gain by 50 per cent.
Structure your assets
Explore the use of different structures such as a family trust to better manage your assets and distribution of income.
Private health insurance
Having private health insurance coverage means you avoid having to pay the Medicare levy surcharge.
Tax plan with your accountant
Maintain communication with your accountant and ensure you undertake a tax planning session once a year. This will help you to plan for the future and ensure that you have identified all the opportunities to minimise your bill at the end of the year.
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