We asked our top accountants for the easiest ways to pay less tax to the government and keep more of the money you earn. They had a LOT of answers so we narrowed it down to their top 10.
Here’s the first part of our two-part article ‘How to Pay Less tax’. It could help you save big $$$ next tax season.
1. Keep Good Tax Records (with the right method, it is very easy)
You need to have receipts for all tax deduction claims so you can show them to the ATO, if they request them. Keeping track of those receipts is the law, but it is also the best way for you to remember everything that you can claim, later on.
Thousands of people miss deductions they could have claimed, every year. Do you? Keeping good records is the best way to make sure you claim every expense you are entitled to (and help ensure your tax process runs smoothly). So make sure you are organised—it’s easy!
Record keeping shouldn’t be a headache. Put aside 5-10 minutes each week to download statements, update your logbooks and put all your receipts into a folder (or photograph them using the Etax app and save them straight into your Etax account). We guarantee it will save a lot of time and anguish at the end of financial year— and you pay less tax!
Here are some great tips to make it easy to keep track of your tax deductible records
- The Etax mobile app makes it easy to save receipts, using your mobile phone camera.
- Read The key to paying less tax is good record keeping to understand exactly what records you need to keep. Also, some good habits to get into to make sure you never miss out on any tax deductions.
2. Be Charitable
Did you know that every donation over $2 you make to a registered charity is tax deductible?
Donating to charity is always a good thing but what makes it even better is that the amount you donate is claimable on your tax return. Now that is definitely a win, win! After you make a donation, you should receive a receipt. MAke sure you keep it. At tax time, enter the total amount into the charity donations section of your tax return.
- One thing about donations we should clear up: Your donations do not come straight back onto your tax refund. The amount is subtracted from your taxable income, which means you get a percentage back.
3. Claim everything you are entitled to claim
Even if you purchase an item partly for work and partly for personal use, you can still claim an apportioned deduction of the cost. In addition, if you have to spend money on anything that relates to earning your income, make sure you claim a deduction for the cost.
If you are not sure whether you can claim a particular item, keep the receipt and ask us in the ‘Any other questions?’ section when you enter your next tax return. Remember, it is always better to keep a receipt and not be able to claim it, than to throw it out and find out you could have!
4. Seek the Advice of Tax Professionals
In most cases, using a tax agent or accountant won’t just save you a lot of time, it will also improve your tax refund or net payable. This is why the ATO’s statistics show 70% of Australians use a tax agent’s service – like Etax.com.au!
Etax Accountants are experts in tax and constantly stay up-to-date with changes in tax legislation. We may find you are entitled to deductions you are unaware of or even an offset you didn’t know existed. Quite often our people spot and correct little mistakes that could slow down a taxpayer’s refund. Worse still, left unchecked, these mistakes can also cause an ATO reassessment or audit.
The best part is; the cost of the Etax online return is very low and is claimable as a deduction on next year’s tax return.
A tax agent’s job is to help you avoid ATO problems and to help you pay less tax.
5. Medicare Levy Surcharge
If you’re without private hospital insurance and your income exceeds $90 000 for singles or $180 000 for families, you will be required to pay a minimum of 1% Medicare Levy Surcharge. This is on top of the compulsory 2.0% Medicare levy paid by most Australian taxpayers.
Often the cost of taking out private health insurance will cost less than the 1% of your gross income you’ll have to pay each year.