Our Top 5 Tax Minimisation Strategies

If you only think about ways to minimise your tax when it’s time to lodge your returns, you’re potentially leaving thousands of dollars in tax savings on the table. 

Sure, you can claim a few deductions that reduce your tax, but you’re missing out on other tax strategies like income splitting, super contributions, and trust structures that could save you even more money. These strategies need to be implemented before the end of the financial year.

At PCR Accounting & Advisory, we have years of experience helping Aussie professionals and entrepreneurs reduce their tax liability the legal way. Let’s walk through our top 5 tax minimisation strategies. 

Top 5 Australian Tax Minimisation Strategies 

1. Max out your super contributions 

Concessional (before-tax) super contributions are subject to a reduced tax rate of 15%. Directing more of your income towards your super can significantly reduce your tax, especially if you’re in the higher tax margins. 

Say you earn $170,000 per year—which falls in the 37% tax margin—and you contribute $20K towards your super, you will only pay 15% in tax; a significant 22% difference. While you cannot access this money until you retire, you get to put more of your income towards retirement savings. 

Keep in mind there’s a $30,000 concessional contributions cap. If you reach it, check if you have any unused cap balances from the previous 5 financial years. You can carry them forward to the current year, allowing you to contribute more than the $30,000. 

2. Claim allowable deductions

You can claim deductions on expenses directly related to earning your income, such as work travel, work equipment, and certain work from home expenses. It’s easy to make a mistake here, so work with an accountant to figure out which deductions you can and cannot claim, and have proper documentation for any deductions you claim.

If you run a business, remember to also claim deductions for depreciating assets such as vehicles, machinery, and furniture. There are two ways to go about this. 

For businesses with an aggregated turnover of less than $10 million, you can claim an instant write-off for any asset you bought for less than $20,000. 

For businesses with a higher turnover or if the asset costs over $20,000, use the small business pool simplified depreciation rules to calculate deductions. 

3. Income splitting & trust structures

Income splitting involves shifting a portion of income from a higher-earning spouse to a lower-earning spouse. This lowers your taxable income and could lead to significant tax savings. 

While it is legal, the ATO has recently begun to scrutinise income-splitting arrangements more carefully. The main thing to know is that if you earn a personal services income (PSI), you cannot split your income. Examples include medical practitioners, IT consultants, and financial professionals. 

But when it comes to business and investment income, it’s usually okay to split it among multiple family members using a trust. Just make sure you follow all ATO rules when setting up and managing the trust. 

4. Timing of income and expenditures

When done right, timing your income and expenses can shift your tax bill down by thousands of dollars. Here are some timing strategies you can use to minimise tax: 

• Pay deductible expenses like rent, memberships, licenses, and interest on loans before 30th June. You can then claim these deductions when you lodge your tax returns. 
• Delay income (especially if it’s significant) to July 1 or after, which can keep you from going up to a higher tax bracket. You can do this by sending large invoices after EOFY, delaying the sale of assets to defer CGT to the next financial year, or negotiating payment terms so the money hits your account after June 30th. 
• If you have an investment that’s not going well, sell it before June 30 and use the loss to offset capital gains. 
• Buy equipment before the end of the financial year and take advantage of the instant asset write-off to claim immediate deductions on depreciation. 

5. Tax offsets & credits

Tax offsets and credits are even more powerful than deductions when it comes to tax minimisation. Unlike deductions that lower your taxable income, tax offsets reduce your tax dollar-for-dollar. A $1,000 offset cuts your tax by the same amount. 

Find out which tax offsets and credits you’re eligible for depending on your income level, your industry, and your business activities. 

Some examples include R&D tax incentive for innovative businesses, small business income tax offset (can save you up to $1,000 on tax per year), franking credits, fuel tax credits and more. 

How PCR Can Help You Pay Less Tax

Tax saving can get technical and complicated, especially for high-income earners. It might feel like there’s a strategy you’re missing out on, or you may be anxious that some of your strategies could land you in trouble with the ATO. 

At PCR, we can help you with technical tax expertise and planning to make sure you don’t pay a dollar more than you need to in tax. We offer personalised advice on how to implement tax minimisation strategies while keeping it 100% legal. 

Chat with us to find out how you can maximise your tax savings. Enquire online today. 

Disclaimer: This blog post is for informational purposes only and should not be considered as financial or legal advice. Consult with a qualified professional for personalised guidance based on your specific circumstances.