It's nearing the end of the financial year, which means it's time to tackle your tax return. Here are a few tax tips from the experts that might help you lower your tax bill.
1. Open an offset account
A mortgage offset account allows you to minimise your tax on interest earned on savings. It is an account that is tied to your loan account and allows you to use your saving account balance to reduce the amount owed towards your loan.
The interest earned on your savings is put towards the amount payable on the loan, enabling you to reduce how much you owe by cutting the time it takes to pay off your home loan.
There are two types of offset accounts: a 100% offset and a partial offset. A 100% offset means that the same interest is earned in the savings account as is paid in the mortgage account, whereas a partial offset means that a lower interest is earned than is paid.
Contact us to find out more about opening an offset account.
2. Consider salary sacrificing
There are tax advantages in salary sacrificing items instead of purchasing them yourself. Under a salary sacrifice arrangement (also known as salary packaging), you agree to forgo part of your future entitlement to salary or wages in return for your employer providing you with benefits of a similar value. The type of benefits might include cars, property, home loan repayments, superannuation, mobile phones, computers and child care fees.
You only pay income tax on your reduced salary, but you receive the reduced salary plus the benefits. You can also make employee contributions out of your after-tax income towards the cost of the benefits and reduce any reportable fringe benefits tax.
To be eligible, first check with your employer regarding their fringe benefit tax policy and items you can salary package as there may be existing policies in place.
3. Check your deductions
Make sure you are claiming all the deductions you can for your specific occupation. There's a useful guide on the ATO website that shows allowable deductions for 20 different occupations. Go to www.ato.gov.au and search for 'deductions you may be able to claim'.
4. Claim income insurance
The ATO allows you to claim income protection insurance as a work-related expense. It is insurance worth considering for anyone in the workforce as it pays a portion of your salary for a while if you're temporarily unable to work because of sickness or injury.