A finance expert’s advice of ways to save on tax

Written by Melissa Browne; accountant, entrepreneur, business advisor and finance author.


When the Federal Budget was announced recently, hands up if you thought: ‘what’s in it for me?’

If you did, did you do anything about it?

As an accountant and financial advisor, I find people will often complain about the amount of tax they’re paying, but other than the brief moment in which they find out if they’re receiving a tax refund, they generally aren’t motivated to take action.

Perhaps that’s because you don’t know what to do or you don’t know how your individual circumstances affect what you could potentially do?

Perhaps it’s because you figure taxes are inevitable, so you may as well get used to it.

Now’s your chance to do something different.

Follow my money-saving advice I commonly give to different types of clients at tax time.

This is your opportunity to see if you can make some changes and potentially keep some money in your wallet.

 

Smarter ways single people can manage their money

Know your limits

It’s great to be single and fabulous, but to avoid being single, fabulous and broke, you need to be smart with every dollar you earn.

You should start by creating a plan for what might happen if you become ill, injured or made redundant: consider income protection insurance so you can cover rent or the mortgage while you’re not working. It’s actually tax deductible.

You should also understand how you might be affected by the single threshold for private health insurance (currently $90,000), even if you’re not yet above the threshold.

 

Rest easy knowing you have your bases covered

Rest easy knowing you have your bases covered.
 

Consider different tax structures

If you’re investing as ‘a single’ then you don’t have the luxury of splitting your gains with a partner who might be on a lower income than you.

However, you can still take advantage of lower tax rates by considering investing in alternative structures such as a Trust or Self Managed Superannuation Fund (SMSF).

That way your hard-earned investment gains won’t be added to your taxable income, which is particularly relevant for higher income earners.

 

Tax opportunities for couples; including those with kids and dual-income-no-kids partnerships

Be aware of private health insurance limits

If you’re on a low income, you might have never prioritised private health insurance.

But if your new partner is on a higher income, and your combined income is more than $180,000, you’ll be charged an extra one per cent Medicare levy surcharge if you don’t have cover.

This means on an average wage of $60,000, you’ll be taxed an extra $600 for absolutely no benefit.

So consider getting basic hospital cover, at a minimum.

Think about your income

Many couples open a joint account for their savings goals, which means both partners end up paying tax on the interest.

It might not be a whole lot of money with interest rates so low, but it is potentially unnecessary.

Instead of having both names on the account, consider holding your interest in the partner’s name with the lowest taxable income to avoid losing the little interest you’re earning.

Of course, you need to mitigate risk – which might include both partners to sign for account movements – but if you’re in a committed relationship, it’s an option worth exploring.

How to understand tax benefits for families

For families (with children) it’s important to be educated on what you’re potentially entitled to; including Family Tax Benefit, Childcare Benefit or others.

If you’re likely to pass an income threshold it might be worthwhile bringing forward some tax deductions to this financial year, in order to stay just below it.

Yes, dealing with Human Services can be exhausting, but if it means keeping money in your pocket, then it’s best to do your due diligence.

That could be as simple as paying for a conference now that you’re attending in July, so you’ll stay under a threshold.

Of course, with all of this advice, it’s important to understand that it depends on your particular circumstances.

So if you love the idea of a quick win before tax time, make sure you contact a great accountant to find out about your best tax opportunities.

 

For families with children it’s important to be educated on what you’re potentially entitled to

Saving a little money now can pay off down the line.
Officeworks

SHARE