What general methods are there for people to reduce the amount of income tax they pay?
I'm aware that there are things that can be done, however, I don't know a great deal about things related to finance and economics.
I work 2 jobs:
Job 1: $80k per annum
Job 2: $30k per annum
Cheers
That and the fact we don't have a ready labour pool of illegal immigrants who will work for nothing in the trades. I'm thinking in the US where Mexicans do all the trades for a pittance. In Oz tradies are millionaires which is totally bewildering to tradies in other nations.
One other reason is because too many kids are going to uni versus getting a trade leaving a small supply of tradesman who can and do charge whatever they want and we have to pay.
And buy a ford ranger to carry you ladder
You know cause you need a ford ranger to carry that ladder.
Ladder, spotlights, awning, camping drawers, rooftop tent, roo bars, super size wheels/tyres. All daily essentials for the average cashed up tradie
Don't forget a new camera, gimbal, and drone for their Youtube channel.
This week on the 100, 61% of respondents answered "yes" to paying cash for something for a lower price.
I'd imagine most of those 61% paid a tradie… Hard to argue alot of those new Ranger's and HiLux's weren't bought with tax free income…
Could just be avoiding those 2% card surcharges…
Ha possibly! I didn’t think about it that way!
Buying a fancy ute would be an instant asset write off for a small business so they would pay for that legitimately and use cash for everyday living expenses that can’t be claimed on tax
Just give up all your jobs and you will pay $0 in taxes to the gov
Doesn't have to be all of your jobs, only enough that you are below the tax free threshold.
Or get a negatively geared investment property
You still have to actually lose money to be negatively geared
"lose" while the value of your house quadruples in price
'negatively geared investment property'
originally meant borrowing more than the property was worth
but since that's almost unheard of by most folkz I know
now it usually means cash flow - expenses more than rent income - with the negative amount claimable on annual income tax returns
better achieved with houses rather than units - e.g. pre-COVID houses typically had 3.5%pa gross yields (rent pa on expected sale price) compared to units 5.2%pa - so 1.7%pa more tax deduction
though beware of e.g. NSW Land Tax which could see you paying $9Kpa or such
and land appreciates while buildings depreciate (lose value) so rental houses could provide net income tax deductions for some years until loans reduced and rents rose enough to become positively geared
at which point you could reborrow against the increased equity to thereafter borrow 105% (including purchase costs like stamp duty) to buy another investment property (not home - not tax deductible!) to boost your net returns.
Rinse and repeat for 30 years and you would be sitting pretty - but that relied on having a steady job and otherwise spending less than you earn.
The legendary stories of 19yos owning dozens of properties usually rely on major moxy and get up and go to fix and flip quick renos - basically being young and energetic and spending 100% of your time doing that $#it - incompatible with keeping other steady jobs
so high risk can be high returns - if you don't crash and burn
Rene Rivkin's Rule Number One was 'Don't Lose Money' - Rule Number Two was 'See Rule Number One'
Isn't there something where you can buy a new car and take it off your tax or something?
lol
Yes, there is.
You can buy a car and donate it to charity, then claim the whole amount as a tax deduction.
(Just so that we're clear, it's a tax deduction, not a tax rebate!)
Has to be mercedes
You forgot that part about having it on finance. That makes it extra special.
With AMG badge for higher deduction?
Only if you are a tradie…
Yes. It’s a novated lease. Essentially you lease a car with your pre-tax dollars and have the option to purchase it for a small amount at the end of the lease. Talk to your employer or an accountant.
Yes, a novated lease, but it generally isnt worthwhile unless you are in the top tax bracket.
There's a lot of calculations and hidden costs involved that a lease manager will gladly not tell you about. If you buy too expensive of a car and/or you don't drive a lot, you'll find that your savings are minimal vs just paying cash.
This.
When I bought my last car, a novated lease was only worthwhile if I drove X amount per annum which was at least double what my annual usage was at the time. The increased fuel costs made a novated lease worse than paying for the car outright by taking money out of my redraw facility.
The increased fuel costs
Why was fuel cost higher on a novated lease?
@spaceflight: I had a look at one and they forced you to prepay the fuel and car servicing in the lease and then you had to use their fuel card (BP). 7-11 is obviously much cheaper than BP for a start.
Also, they claim you don't pay GST on the car. Technically true but all the repayments have GST added, so you end up paying exactly the same amount of GST.
Also, due to how the deduction appears, you don't meet any reduced thresholds for things like MLS or child care.
They also charge a novated lease fee every month.
There's conditions about how the car is purchased which usually means you overpay for your car. I'll typically buy a demo or 1-2 yr used car for instance.
I did the calculations and a regular car loan is actually cheaper. Also paying in cash even cheaper.
This. Complexity added to your life for little or no benefit.
you can lease car with pre-tax money but your tax rate is too low to have any benefits from it
you need to be close to top bracket tax rate for it to be effective.
your bracket on 80K job is around 22-23%
second job is higher but you get them back so your overall tax bracket is around 25% for both job combines
what are you complaining about it a decent price to pay for having good health and infrastructure system
the best you can do is salary scarified into super max out 25K limit tax at 15% instead of 25% again not a hell of saving
maybe a 1K or 2K at most
i dont know why your quoting his effective overall tax rate (22-23% & 25%), when you're doing tax deductions the only thing that mattters is your marginal tax rate. Since op is on 110k, that's 39%.
Only 32.5%, otherwise this is correct.
Yes it is possible. Set up a shell company and buy car through it.
I think first you need understand what a 'tax deduction' actually is.
OP is asking about Tax reduction in the title but by looking at his comments I think Tax avoidance is what he actually means…
Tax avoidance vs tax evasion are legally not the same.
Either way let's hear it!
The Common Law Approach
The common law in Australia is regarded as being settled on the distinction between ‘tax avoidance and tax evasion’. In the case of R v Mears, 24 the NSW Court of Criminal Appeal, when considering an appeal against the severity of a sentence for an action pursuant to s 86A, Crimes Act 1914 (Cth), conspiracy to defraud the Commonwealth, Gleeson CJ made the following statement on the distinction between tax avoidance and tax evasion:
Although on occasion it suits people for argumentative purposes to blur the difference, or pretend that there is no difference, between tax avoidance and tax evasion, the difference between the two is simple and clear. Tax avoidance involves using or attempting to use lawful means to reduce tax obligations. Tax evasion involves using unlawful means to escape payment of tax. Tax avoidance is lawful and tax evasion is unlawful. Although some people may feel entitled to disregard the difference, no lawyer can treat it as unimportant or irrelevant. It is sometimes said that the difference is difficult to recognise in practice. I would suggest that in most cases there is a simple test that can be applied. If the parties to a scheme believe that its possibility of success is entirely dependent upon the authorities never finding out the true facts, it is likely to be a scheme of tax evasion, not tax avoidance.25
Tax avoidance - legal but morally questionable
Tax evasion - illegal
They both interchangeable and the same under ATO eyes
what you mean is tax minisation
avoid or evade paying tax is illegal
@rektrading: not according to ATO, Tax avoidance name is all over that sites
https://www.ato.gov.au/Tax-professionals/Your-practice/Tax-a…
@Hearthstone: The tax office may make the rules but it's the Court that decides what is or isn't legal.
Judge Gleeson CJ made it clear in Court that tax evasion and tax avoidance are legally different.
Tax avoidance is legal. Tax evasion is not. Does not matter what ATO says.
Tax Law class at Uni said so.
About 1 % of all Gamblers are capable of being professional and pay no tax on income .
Poker , Sports Handicapping are 2 of them .
I'd have thought once you are deemed pro, you pay tax on earnings, even if it's gambling earnings
Hire a tax accountant and ask them.
In an convenient coincidence that would be tax deductible too… 2 birds with one stone
donate it all to charity
Doesn't reduce your tax though, just like "writing offs" don't decrease your tax - you just made less money.
Um ok you clearly don’t understand taxation.
Tell me How does it not decrease your tax?
You earn 50k you pay say 10k tax
Or
Your earn 50k and donate it all to vinnies, your income is now 0k and you pay 0 tax
your income is now 0k and you pay 0 tax
Yeah… you also made no money.
I presume that isn't OP's objective. Call me crazy.
@tbelwl3: That wasn’t the question nor point of my comment.
So how does it not reduce your tax
There was also a little bit of stupidness in my comment as in it reduces your tax but serves you no purpose , you didn’t pick that up though did you
@Donaldhump: You also think "not making money" or "making less money" is a good tax minimisation strategy too right….
Donating money to charity does not reduce the amount of tax you pay, in relation to having more money to take home. Which is the only thing anyone is talking about (why would you talk about reducing tax and reducing your take home simultaneously literally makes no sense).
You would be better off by not donating. Significantly better off.
@tbelwl3: It does reduce your tax. Bloody hell do you want to wager 50k on this.
It wasn’t a serious response in terms of being better off, but it is an option to reduce your tax
@Donaldhump: in the same way that not making any money reduces your tax
I'd love to wager 50k on OP not wanting that type of advice sure lol
@tbelwl3: The question is “how do I reduce the tax I pay”
So final offer do you want to have a wager on this?
@Donaldhump: This is like you saying "Oh wait you mean on earth? I thought you were talking about paying taxes on the moon!"
Reducing tax to increase your take home is obviously what OP wants here. Claiming that you are some how right because you missed the context (And I actually suspect you didn't understand that donating money does not increase your Take-home, or that it doesn't even equate to just paying tax in the first place) doesn't make you look clever….
@tbelwl3: F??? Me read the question. Never states “whilst keeping more in my hand”, otherwise negative hearing, buying equipment, super sacrifice are all useless
And just to explain to you because you seem slow, it wasn’t a serious response, you get it, it’s not actually a strategy to do, unless you have a wood for charities
So we are having this wager, easy 50k to me
Never states “whilst keeping more in my hand”
"It never said it wasn't on the moon!"
because you seem slow
We both know I don't.
@tbelwl3: Both know you don’t what?
Make sense , yes I def know that .
So yes donating charity reduces your tax , so your initial response is bloody wrong, but your too arrogant to admit it.
Good night
@Donaldhump: But wait he didn't specify if it was on the moon or not, how are we to know if moon tax applies??
@tbelwl3: So your wrong and know it but no have to divert the subject to the moon, personality flaw right there
@Donaldhump: Hey if you think making less money is a good tax strat more power to you!
I don't know what you're talking about so I assume you're projecting, I wish you luck in your struggle :)
@tbelwl3: That wasn’t the question, how many fricken times do you need to be told.
The q was how do I reduce the tax I pay.
Donating to charity is tax deductible thus reduces your tax tax bill, which in your initial reply you claim to be false. So you should ring up the tax office and tell them to amend their rules as you have decided it isn’t or admit your first sentence is wrong. But you obviously can’t because you are arrogant.
Anyway good night, I’ll get more sense out of talking to my dog.
And since you’re so smart what is one way you can reduce your tax bill without spending any money? Other than driving kms tjat you may or may not actually do.
@Donaldhump: So wait are you still confused about the tax jurisdiction being on the moon or not? Because he didn't specify so how could you know. And context can't help you out - right?
Making no money lets you pay no tax at all! That's what you are suggesting here right? It's very clever.
And since you’re so smart
I feel like you are intimidated even though this is sarcastic lol
what is one way you can reduce your tax bill without spending any money
discretionary trust
@tbelwl3: How does a discretionary trust help with employment income when it applies to an individual? I’m curious to this one
@Donaldhump: You'll like this - Your question:
what is one way you can reduce your tax bill without spending any money
my answer
discretionary trust
your response
How does a discretionary trust help with employment income when it applies to an individual? I’m curious to this one
Well you didn't say anything about individual income! Are you saying I should have understood from the context?
night night princess x
@tbelwl3: The question states the persons employment income. If you read it
You just make shit up as you go, a trust does not help in any way for employment income , you just speak complete shit.
So tell me how does setting this trust up work for the persons employment income . If love to know as I hate paying 50k tax a year. You really are an arrogant prick who can’t admit their wrong and speak shit. I feel sorry for you, you have no balls or maturity
@Donaldhump: Sorry you are 100% absolutely wrecked with that last one even you have to admit it
Know when you've been beat, that's all I've got for you
@tbelwl3: ? Explain it
Tell me how setting up a trust reduces op tax liability for their employment income , now have they even stated they have a spouse
You have no clue
@tbelwl3: No you just can’t answer your own dribble nor admit your wrong,
Still waiting for your tax advice on this trust you speak of.
@Donaldhump: You actually don't understand what I did, I used your own logic against you and it's backfired for you spectacularly. Have another read.
@tbelwl3: I’m waiting for your tax advice , please tell me how it works for reducing op employment income tax libaility.
This is funny coz you have nfi , not once but twice now you have said false statements, but can’t admit it, you must be a pleasure to work with
@Donaldhump: damn that insult is so spicy 🥵🥵 bout to reconsider my life choices rn!
If you don't understand what I was doing, I used your logic, which I found to be naïve, to answer your question. To demonstrate to you how naïve it is.
No offence I don't need advice on tax law from someone who makes 50kpa
@Donaldhump: When you lied about paying 50k in tax, I can only assume you have gotten that number from somewhere.
Perhaps due to your poor reading comprehension you've put the 50 in the wrong column on your tax return?
@tbelwl3: No I pay about 50k tax a year, you just read that wrong. So third time your wrong. Not that it matters what anyone earns.
According to you so far we have
1.) donating to charity does not reduce your tax
2.) a trust will help minimise tax on employment income
3.) someone who pays 50k tax a year actually only earns 50k and your too above them to take their advice.
3 times wrong in one hour you are on a roll.
I am Interested in this trust and how it works for employment income as you may have invented something here no one knows about
@Donaldhump: I think maybe you can't actually read and if I continue talking to you it might be like bullying a disabled person or something…
You have a list of things you've either made up or have not picked up on the context of - woo!
@tbelwl3: No need to be offensive to disabled people🍭.
And if you think your bullying me and I’m disabled yet You have been wrong three times.
Please explain to the audience your trust tax minimisation for employment income.
But to put this to rest you are correct in everything you say and I am wrong in all matters.
No need to be offensive to disabled people🍭.
I wasn't being offensive I'm trying to be sensitive to your needs
Please explain to the audience your trust tax minimisation for employment income
Please point to where I claimed this lol
But to put this to rest you are correct in everything you say and I am wrong in all matters.
Rodger 👍
@tbelwl3: You said discretionary trust above?
So how does these trusts work for employment income , genuine question as I need to know, and am angry I never thought of this before
You said discretionary trust above?
As a method of lowering your taxes yes, as you asked.
I did not say it was a method of lowering taxes on your wages.
@tbelwl3: But the other person only mentioned their employment income, so how does it help them
They never mentioned they have shares, bonds, rentals, royalties etc
So given this how do they lower their employment tax without incurring an expense
@Donaldhump: What's it got to do with them?
I was answering your question:
what is one way you can reduce your tax bill without spending any money
Using your logic (which is what I was saying was poor logic in the first place), I provided an obtuse, yet technically correct answer. As a way of demonstrating that it is a poor way to answer questions, to you.
I did this about 10 comments ago. That was the entire point of me saying it like that. I'm very confident it was obvious what I was doing.
@tbelwl3: But if the assets are already in the trust you have no tax liability the trust does or the beneficiaries they are distributed too, so you haven’t answered a way to reduce an individuals tax liability in any form.
Why you’re suggesting is to have income producing assets in a trust and distribute to the lowest earners or a corporation.
Anyway take it easy you are the tax king
This has nothing to do with reducing an individuals tax liability if you are suggesting to gift assets of this type into a trust you are going to pay loads of cgt and stamp duties so this may not even be beneficial
@Donaldhump: Even if I take your contorted, context-less answer in a vacuum, you're still wrong. Bucket company means you don't need another "individual involved". So even your attempt to be obtuse fails.
But ignoring your obtuseness:
This has nothing to do with reducing an individuals tax liability
Funny, distributing to someone with a lower marginal than me seems to save me on my tax personally every year. Must be magic!
@tbelwl3: Nfi what your in about explain.
And yes I distribute to my wife and adult non working kids every year.
@tbelwl3: Mate you need to explain I know how trusts work.
I didn’t understand your gibberish
Yes U can have a single company as the lone benificiary and that company can pay employment income to anyone it seems, but it limits the ability of the trust deed to rank order of payment or ensure equal payments between certain classes, so why would u do it that way?
it limits the ability of the trust deed to rank order of payment or ensure equal payments between certain classes, so why would u do it that way?
what are you smoking lol
I know how trusts work.
Yikes you clearly don't as confirmed by your previous statement
Maximise your superannuation for 2021/22. Individuals can contribute $27,500 in concessionary super
And more in unused carry forwards. If you are a high income earner you need to consider maxing out your concessional contributions and carry forwards. It can reduce your tax from 42c to 15c for the funds you add to super.
Can always forward contribute to the next tax year to if your employer is slow at paying it in, by sacrificing your last few pays.
salary sacrifice to super is great if you are older and nearing retirement
probably not so great if you are younger and want to access the savings for investment before retirement (over 60+?)
yeah you pay 15% input tax for concessional contributions to super, essentially getting free money being the difference between 15% and your marginal tax rate, e.g. 45% over $180Kpa, 37% over $120Kpa, 32.5% over $45Kpa, 19% over $18.2Kpa - so best for high income earners (30% FREE MONEY!), not so much for lower (4% …)
Add 2% to each of the tax bracket (medicare levy).
Thus on the 2nd highest bracket op is on, its 39% tax, so he gets 39-15 = 24%
Look.. not to dig on you, but the reason you're getting so many BS answers is cause you asked a BS question. Its not all your fault. Its a little bit the schooling system, but also a lot of 'you can just find it on google'.
Heres a quick guide I found from 3 seconds of googling
https://www.etax.com.au/tax-deductions/
Basically you can only reduce the amount of tax you pay by spending your earnings on things for work or things that earn income (eg. investment properties). This does not include things like travel to/from work or a personal car
@caitsith01: What about if you buy your dog a suit and he goes to work with you?