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June 10, 2024

Trim Your Taxes – 5 Steps to Help You Cut Down Your Tax Bill

No one likes paying taxes. Indeed, if we’re being honest, they can feel a lot like theft. Unfortunately, they’re a requirement of society, and we’ll always have to pay them on some level. That doesn’t mean, however, that you shouldn’t seek to minimize them. 

In today’s article, we’ll be exploring five steps you can take to cut down your tax bill, so more of your hard-earned money finds its way into your pocket this financial year. 

Keep on Top of What You Owe

The first thing you need to do is to be aware of what your tax obligations are and the amount you owe. After all, if you haven’t got a proper starting point, you won’t be able to accurately measure how much you can save. Head over to an online tax calculator to work out this figure, then come back and get started on trimming your taxes.

Salary Sacrifice Where Possible 

Now that you know what you’re going to owe, you can work towards minimizing the amount. One of the simplest ways to do this is to salary sacrifice. Many companies offer salary sacrifice packages to their employees, and they can be a great way to slash your tax bill. This is because any money paid out under this type of program is taken from your pre-tax income, thus lowering the amount of your salary that’s taxable. 

Depending on what you make and the sacrifice options available, you may even be able to drop a tax bracket, making the benefits of this strategy significant.

Increase Your Retirement Fund Contributions 

Much like the above-mentioned salary sacrifice programs, additional 401k or superannuation contributions can be taken from your gross, rather than your net, income. 

There are limits on how much you can contribute before tax, but if you speak with your company’s financial department and enlist the assistance of an SMSF accountant, you can put yourself in a better financial position, both now and in the future.

Track and Record Your Deductions 

While this tip won’t help you save on paying taxes, it can certainly help you get more back at tax time. Many people aren’t claiming anywhere near as much as they are entitled to, purely because they’re unaware that they can claim certain things (or have misplaced their receipts and therefore no longer qualify). 

Speak with a registered tax agent to see what qualifies as a deduction for your profession. Once you have this information, keep meticulous records of all claimable expenses. It takes a little work, but it can save you a lot. 

Choose Investments with Franked Dividends 

Finally, if you hold an investment portfolio, try to skew your purchases towards stocks that pay franked dividends. Put simply, this means the income generated by your shares has already been taxed before it hits your account, thus greatly reducing (and, in some cases, eliminating) your tax obligations in regards to that income. 

The tax benefits of doing this should obviously be weighed against your overall investment strategy to ensure that this path is the right one for you, but it is certainly something to consider.

Tax is a part of life that we’ll never be able to escape, but by following the tips in this article, you should be able to shave a significant amount off what you owe the taxman at the end of the financial year. Please note, however, that this advice is general in nature and should always be considered against your personal financial situation. If you have any doubts about the strategies you employ to manage your money, we suggest speaking to a professional.

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