How Do People Reduce The Amount of Income Tax They Pay?

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



  • If you were a contractor, you could register a company offshore in a tax haven country and start billing your customers here and never pay full tax. This is what all the big corps do why shouldn't you?

    • +2

      As an individual, you'll pay tax when you take the money out of the offshore company to pay your living expenses.
      Many big corps are stuck with huge piles of cash they can't bring back to the home country without paying tax.
      They can at least have the offshore cash piles on the company books or do M&A to inflate their share price, which the execs can cash in on at CGT rates.

      • +1

        Do what the Chinese do and fly political diplomats into the country with cash. Or a dozen people in (once borders are open) carrying cash. Many ways of getting it in :D

  • Concessionable contribution to super, taxed at 15% rather than your marginal tax rate.

    There’s a trick with this you can exploit, making it different to other types of tax deductions … you can contribute to your super during the fin year, then declare the component that is concessional after the fin year has ended and you know your taxable income for that year. Ie you can effectively back-date a deduction to minimise your tax. This won’t suit everyone, but is great for those looking towards retirement and/or not saving towards a house or such. (The remaining component of your contribution will be non-concessional, ie not taxed but also not tax deductible)

    • How is this a trick? Making an amendment to a tax return to include a concessional super contribution.

  • Is there a reason why you would like to reduce the amount of tax you pay? It is only about $28k per year.

    • +1

      I'm happy to deliver some annual training to explain it, for a mere $28k, or $7k in 4 installments on your favorite deferred payment scheme.

  • +1

    Here are some stats from the ATO on what the average person is deducting & tax offsets they're on…

    You can search on your postcode here to see what people in your area are deducting…

  • +2

    Solution: quit the $30k job and invest the extra time in education so that you can have a $110k job and have lots more free time.

  • +2

    Don't think about paying tax as a loss that you need to minimise, think about it as a contribution to building the society that you live in

    Each dollar of tax that you pay goes into maintaining our public roads, supporting medicare and our public hospital system, schools to educate the next generation, public sector investment into the creative arts through public broadcasters like the ABC, and sending our young men and women overseas to war to support our US allies' geopolitical and economic objectives.

    • +1

      And tanks….

      • +3


        Isn’t it amazing we never criticise spending on tanks, but giving aged care residents a decent meal that isn’t slosh or properly funding the ndis - all of a sudden it’s ‘budget, funding blah blah blah’

      • +1

        and their bombs

        And their bombs

        And their guns

    • I'm happy to pay taxes for things like road, healthcare, education. All the other BS the government spends it on is part of why I would want to try and minimize it as much as I can.

      • They will always spend money on BS stuff, but if budget allows, maybe they will spend more on healthcare and education. So vote for the right people and pay your taxes. I mainly do charity because it feels like the government is being forced to contribute to something they don't but should.

  • Earn less

    • +1

      Or don't work. You'll get more than 100% RoI through dole and FTBs and paying $0 tax and getting $$$ from Govt


      • Or work for cash only?

  • By reducing their taxable income.

  • Don’t buy a house if you are worrying about downturn. buy Tatts lotto instead so you are always expecting positive return.

  • "Negative gear" your car by putting it in a car sharing platform. Your fuel, rego, depreciation and mechanic bill is now part of the business expense and can be claimed against your main income. Of course consult this with your accountant

  • +2

    Nice try ATO

    • My first thought as well

  • +1

    I only work 3 days a week and also salary sacrifice to super getting my taxable income down to $45,000.

    And so I pay $5092 in income tax plus $900 for medicare.

    So that's 5992/45000 X 100 = 13.3% income tax.

    (I own my own home is the reason I can do this).


  • +1

    talk to an Accountant is probably the best option here is a short list
    - extra super contributions
    - investment properties negative gearing
    - interest on investment loans ie marginal loans
    - if you have a business despicable assets - cars, phones etc
    - WFH can if you the option to claim certain expenses
    - work related expenses ie uniform
    - KM used driving for work (not to and from but to meeting, training etc)

  • +1

    I donate 100% of my pay to charity

    • +4

      When did you marry Charity?

  • tell your 2nd job you want cash in hand under the table

  • Charity, do good while reducing tax paid :)

  • +1

    You could get an investment loan to buys shares or a investment property etc. With interest rates where they are share may tactfully be positive with franking credits so you may pay more tax.

    You are only paying 28k tax. Someone has to pay for schools, roads, defense, social, pension etc. I bet if you calculated cost per person you are not paying your way .

  • With your income exceeding $90k, it makes sense to get yourself a private health insurance (if you don't already have one), and save 1% on Medicare levy surcharge.

    • Well, it's either you pay the MLS or the private health insurance…works out to be about the same.

  • The ignorance in this section is astonishing. Is anyone actually trying to help OP?

    • +1

      why would they?

      low effort in -> low effort out

    • Hi,

      What are you bringing to the table, locknuts?

      • I'm trying to PM OP to explain how I legally reduced my income tax. It won't let me though. Is it because he's a new user?

        • +1

          OP is a troll.

          Member Since
          Last Seen
          1 posts / 3 comments

          • @rektrading: Well maybe the responses are justified then. Jeez I thought I was actually going to help someone there.

            • @locknuts: I would like to know how you legally reduced your income tax. DM me please :)

    • +2

      There's not much help. He's in the unfortunate position of being in an above average income compared to most and therefore paying more tax but not being high enough to qualify for the more lucrative tax deductions that are available to higher than their income earners.

      • +3

        That's not really fair. OP has clearly bailed which is a bit shit, but there's actually some killer posts in here. People are trying to help. Challenge is that at ~$110K there's not a lot you can do.

        There's also lots we can't answer because there is zero info. Industry, savings, investments, spouse circumstances and loads more is needed. If one of those "Jobs" is their own business, contract work or derived from an investment, then loads of the suggestions may apply.

        This is why they need to talk to an accountant.

      • t not being high enough to qualify for the more lucrative tax deductions that are available to higher than their income earners.

        and what are those? the 'lucrative tax deductions' for higher income wage earners are no different to those available to lower income wage earners (except that the deduction is 'worth more' because the marginal tax rate is higher)

        The lucrative deductions, or tax minimisation via trusts etc, are pretty much only available to non wage earners and non PSI affected businesses. Whether that business earns $50k or $500k

        If you are talking about tax minimising your investment income, then those options are available to everyone. Obviously higher income earners have more investments but its not some conspiracy where only high income earners can use the options

      • what kind of lucrative tax deductions available to higher income earners?

    • There are numerous responses referencing the ATO website.

  • -1

    If you aren't one of the millions of people who have 4 investment properties that need "repairs" which you charge the actual tax payers (aka the suckers) for through negative gearing, and reduce your tax, whilst simultaneously increasing the value of those houses by $100k a year due to high demand of homes and locking out people with an average income, then you're doing it wrong.

  • Ask to be paid in cash 💰 if not already doing so

    • It seems like deja vu all over again, but let's play along.
      How would being paid in cash benefit OP?

      • +1

        He is implying to be paid cash off the books. Not sure how the cash would get off the books in the first place though.

        • Exactly, so many people must think that cash just suddenly appears.
          And then there is the inference that the recipient doesn't need to declare it to the ATO (like all other income).

  • +1
    1. Make additional contributions into Super and claim as a concessional contribution (you can do this via salary sacrifice or a lump sum). Speak to an FP*
    2. Utilise all work related bills. Speak to an accountant.
    3. Work cash jobs (which is, in effect, tax evasion so I don't endorse it).
    • I know OZB hates FPs generally, but they can do some good work for you in the long run. I've known people with relationships with an FPs for as long as 15 years (i.e., during the GFC and all) and they've been helpful to them, not from just a wealth generating perspective but from a financial education aspect as well. This shouldn't deter you from learning about your personal finances as it should compliment your experience with the FP.
  • Make less money

  • +2

    Borrow money for some kind of investment, now you can tax deduct the interest on that loan.

    Works well on a house.

    • Assuming the investment will be worth more than the interest and upkeep needed.

      Most landlords borrowing 80% are subsidising the living cost of renters.

      Do your sums before your think about paying less tax. No point paying $2 to save $1 of tax.

  • +3

    Serious answer:

    People do it through some pretty scummy and generally illegal (but common) ways, meaningful reductions in your tax is very unlikely if you follow the law. Anyway:

    1. Lose money - that's what tax deductions are supposed to be - losses incurred through the attempt to earn money. So losing money with negative gearing on an investment, or losing money paying management fees to a mutual fund = tax deduction.
    2. Sponge off your family - if you have family who don't have jobs or who earn less than you, setup a company and set them as beneficiaries. Get your salary paid to the company and distribute it to your family beneficiaries. Pay 1/2 tax you did before!
    3. Buy shit for your home, and charge it to your company - complete a renovation to your home - build an extra storey, or a new garage - charge all materials to your company and tax deduct it.
    4. Buy stupid expensive "art" or other bullshit, sell to an inner circle of like minded people - claim gains and losses on it's "value" as you see fit.

    Note: Don't do any of the above, not legal advice. This is just what people actually do.

    • What OP does is PSI even if get paid as a business. So none of them works.

      But it is true that is what people actually do. Too many working mom's are actually only works in paper & get full benefit, having cuppa at local cafe while the gov paying for childcare.

  • CGT loss on shares. just buy some dog shares :)

  • For little fish (salary worker), you just have to accept to pay the tax, not much you can do.
    If you are a big company(executives) you can hire big accountants to find some loopholes.

    • Workers pay taxes for the benefit of job security.

      The self-employed don't have the same job security but have more playing room with tax avoidance.

      • Unless you earn psi

  • Earn less money duh

  • Didn't expect to get so many comments.

    I appreciate the suggestions and I realize it is a pretty dumb question as its probably something everyone tries to do. As I've said, I am on the dumbs scale financially. I do not yet own a house, nor do I have shares or any investments. Hoping to change that over the next few years.

    I've figured out what I'll probably do with respect to my jobs, cheers.

    • Really curious… whats your work schedule like? How do you have enough time to live your life outside of work.

      I'm guessing youre doing 9-5 M-F for your first job.. How about your second job?

      • +1

        just a normal 9-5 M-F for the first job and then another 15-20hrs or so for the factory job scattered throughout the week

  • We have a family trust with a corporate trustee to distribute our incomes.

  • My two cents:

    Get medical health insurance. You are paying the medicare levy surcharge. Get a basic cover and you slash that.
    Claim deductions for your laptops and other devices. I think some of the tax concessions introduced due to COVID still exists so use them. If you do any WFH then claim internet, gas and electricity. If you have a genuine home office, then also claim part of your interest payments.
    Claim the travel expenses if you travel between your jobs.
    Get a tax agent to do your taxes. You can deduct the expense and also if your claim is wrong, you have indemnity.

    • You have no indemnity - if the claim is wrong then you the taxpayer is liable for any tax an any penalties.
      Both you and the tax agent could be prosecuted by the ATO. Otherwise, what is to stop you from paying a tax agent to make false claims on your behalf. Collusion does happen quite often, its just that normally an agent might make a small deduction to avoid tax so that you come back to them. Eg. You want to make a claim for that without a receipt - sure I'll let it slide. Did you know that the average deduction for your profession is $$$. I'm sure you had expenses too, I'll just put down 75% of the average. Some people/agents believe it is worth the risk because you are unlikely to get audited.

  • Move to Monte Carlo

  • I'm waiting for WW3 to start and then prices should come down abit

  • i don't see it so I have to mention the ozbargain way:
    Buy a sports car as an investment

    • Sports cars can be an investment vehicle, don't forget they aren't subject to CGT here or most places in the world as they're classified as a hobby.

      Given it's not subject to CGT, there's nothing for you to deduct, and that defeats the purpose of claiming any losses on your tax return.

  • If you are interested in the investment property way of saving tax its actually quite an effective way. Firstly the interest paid on the loan is a deduction but also depreciation of the asset is a bonus that can earn you a decent tax deduction depending on the age and value of the property.
    Saying that dealing with tenants isn't everyones cup of tea

  • If you are interested in the investment property way of saving tax its actually quite an effective way. Firstly the interest paid on the loan is a deduction but also depreciation of the asset is a bonus that can earn you a decent tax deduction depending on the age and value of the property.
    Saying that dealing with tenants isn't everyones cup of tea

  • +1

    If you’re working 2 jobs then you’re likely a hard worker. It sounds like you have a goal of saving for a house deposit?

    The two biggest things to try are to increase your income, and to decrease your spending. All the tax shuffling strategies in the world might help, but if you can do the basic part you’re going to be better off.

    1) ask your employers for a pay rise. If you’re doing well they might pay without a fuss. If they say no, ask what you can do to get an extra 10k.
    2) find ways to save an extra $100 week, and invest that money. An extra 5-6k per year in savings makes a difference.
    3) sell things you don’t need or use anymore
    4) look at basic hospital health insurance. It’ll likely save you money on tax (just).

    If you can get an extra 10k in salary, save 5k a year by spending less, and can sell $1000 worth of old things you don’t need anymore, you’ll have about 12.5k extra at the end of the year after tax.

    Hope that helps.

  • If you travel between the two jobs you can claim transport.

    When you can claim transport expenses
    You can claim the transport costs you incur when travelling:

    directly between two separate places of work – for example, when you have a second job (if one of these places isn't your home)

  • I've quit my second job.

    • What was your second job?
      Asking for a friend.

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