Which best describes your accounting needs?
How Can You Legally Reduce Your Tax in Australia?
1. Maximise Your Work-Related Deductions
What expenses can I claim as tax deductions?
If you've spent money for work purposes and haven’t been reimbursed, you may be able to claim it as a deduction. Common deductions include:
- Home office expenses (internet, electricity, phone, and equipment)
- Work-related travel (mileage, flights, accommodation)
- Uniforms and protective gear
- Professional development courses
- Tools and equipment related to your job
Do I need receipts for deductions?
Yes! The ATO requires proof for all deductions. Keep receipts, bank statements, or detailed records.
Can I claim self-education expenses?
If the course directly relates to your job, you can claim tuition fees, textbooks, and travel expenses. However, you can’t claim a course that helps you enter a new career field.
2. Make the Most of Super Contributions
How can superannuation reduce my tax?
Making voluntary contributions to your super fund can lower your taxable income while securing your retirement. This is particularly useful for high-income earners.
What’s the tax benefit of contributing to super?
- Personal contributions up to $27,500 per year (including employer contributions) are taxed at only 15%, which is usually lower than your income tax rate.
- If your taxable income is under $37,000, you may be eligible for the government co-contribution of up to $500.
- If you earn more than $250,000, an additional 15% tax applies (Div 293 tax), but this is still lower than the highest marginal tax rate.
3. Take Advantage of Small Business Tax Concessions
What tax concessions are available for small businesses?
Small businesses in Australia can access several tax benefits, including:
- Instant Asset Write-Off: Eligible businesses can immediately deduct the cost of new equipment (check the current threshold for the financial year).
- Simplified Depreciation: Claim deductions for depreciating assets more quickly.
- Small Business Income Tax Offset: If you operate as a sole trader or through a partnership, you may receive a tax discount of up to $1,000 per year.
- GST Credits: If you're registered for GST, you can claim credits for GST paid on business purchases.
4. Use a Trust or Company Structure for Tax Efficiency
Should I operate as a sole trader, trust, or company?
Your business structure affects your tax rate.
- Sole traders pay tax at individual rates (up to 45% for high incomes).
- Companies pay a flat tax rate of 25%–30%, which can be lower than personal tax rates.
- Trusts allow income to be distributed to family members, potentially lowering the overall tax burden.
Does this work in every state?
Yes, but payroll tax and state-based business levies vary. It’s best to check with an accountant.
5. Prepay Expenses Before June 30
How does prepaying expenses reduce my tax?
If you have the cash flow, paying for next year’s expenses (such as rent, subscriptions, or insurance) before June 30 can increase deductions and lower your taxable income for the current financial year.
Can I prepay multiple years of expenses?
Some expenses, like rent and subscriptions, can be prepaid up to 12 months in advance and still qualify for a deduction.
6. Keep Good Financial Records
How do poor records cost you money?
Failing to track expenses means missing out on deductions. Use accounting software like Xero or MYOB to keep clear records and ensure you’re claiming everything you’re entitled to.
What’s the best way to organise receipts?
Use a digital receipt storage system or apps like Hubdoc or Receipt Bank to automatically categorise and store records.
7. Claim Investment Property Deductions
What investment property expenses are tax-deductible?
- Interest on loans
- Depreciation on assets
- Maintenance and repairs
- Property management fees
Does this apply in all states?
Yes, but land tax and stamp duty rules differ between states, so consult an accountant.
Can I claim negative gearing benefits?
Yes, if your rental property expenses exceed your rental income, you can offset the loss against your taxable income, reducing your tax bill.
8. Use Salary Sacrificing
What is salary sacrificing?
This is when part of your salary is redirected into benefits like superannuation, cars, or laptops, reducing your taxable income.
Does salary sacrificing work for everyone?
It’s best for employees earning over $45,000 per year and those who receive structured benefits.
9. Charitable Donations
Are donations tax-deductible?
Yes, donations to registered charities over $2 are deductible.
Can I claim volunteer work as a deduction?
No, the ATO does not allow deductions for the value of time spent volunteering.
Final Thoughts: Get Professional Advice
The tax system is complex, and making the wrong move can cost you money or lead to an ATO audit. The best way to legally reduce tax is to have a smart strategy tailored to your specific situation.
Need Help Reducing Your Tax Bill?
Latitude Accountants specialise in helping small businesses and individuals optimise their tax strategy while staying compliant with Australian tax laws. Book a consultation today to make sure you’re not paying more tax than necessary!
Follow us on social
Need an accountant?