Tax Relief for Australian Households
Tips for Families in Australia to Reduce Their Taxes
Aug 22, 2009
All good citizens pay taxes. However, there really is no need for taxpayers to pay more tax than they need to. So how can Australian households enjoy more tax relief? The following are some strategies for families in Australia to reduce their taxes through legal means.
Use Income Splitting to Minimize Tax
In Australia, married couples or partners in a de facto relationship can use income splitting to minimize tax. Basically, this works by having savings and investments made in the name of the spouse or partner on the lower income tax bracket. This, in turn means that interest income or earnings from investments will be taxed at the lower tax rate. This approach certainly works well for single income families or in families where one spouse is earning much less than the other.
Pay off as Many Debts as Possible
Debts are often paid with after-tax dollars. So it’s best to pay off as many debts as possible to reduce tax bills, suggests David Koch, author of Kochie’s 101 Ways to Survive 2009 (Wilkinson Publishing, 2009). “Use any space cash to pay off debts and you are saving yourself from paying out more than 10% in interest. Paying off the mortgage should be a major priority because a home is also capital gains tax-free,” he writes.
Delay Income Until the Next Financial Year
Every dollar of income earned is taxed at the marginal tax rate. The less income a family earns, the less tax it has to pay. So families who expect to make less income in the next financial year (and therefore will be taxed less) should delay receiving interest earned on their savings until then, Koch says. Talk to the bank to find out if interest payments can be delayed in such a manner to reduce taxes.
Claim Work-Related Expenses
Claiming all work-related expenses is also tax effective. Basically, these are expenses that a person incurs as an employee while doing his or her job. The cost of generic items such as trade magazines, books, tools and equipment, protective items and work-related workshops can be claimed.
There are certain conditions, though. There must be proof of purchase of these items and no reimbursement has been made by the employer. Also, make sure all receipts are kept and the expenses are directly related to the work performed. Visit the Australian Taxation Office website to see the guide on claiming work-related expenses.
Although many Australian households pay a lot of taxes every year, there are many ways they can reduce their taxes legally. Income splitting, paying off debts, delaying income till the next financial year and claiming work-related expenses are just a few tax effective measures families can make use of.
Found this article useful? Read also More Tax Deductions for Australian Households, Tax Effective Investments for Families and Choosing Household Tax Specialists in Australia.
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