Workers could be left with more money in their pockets after their tax return if they follow five simple rules.
Money expert Nicholas G. Muscat revealed in a video the shortcuts would not only lead to a bigger tax return but also greatly reduce the amount of tax taken from an income.
‘There are five ways you can reduce your tax. It’s the thing nobody wants to talk about, but the thing everyone needs to talk about.’
The tips are as simple as salary sacrificing, expense claiming, and setting up a trust to name a few.
Already the Australian Taxation Office has recorded a record-breaking amount of tax returns this year.
The beginning of the new financial year on July 1 saw the tax office website crash as people rushed to file their returns.
Money expert Nicholas G. Muscat (pictured) revealed in a video the shortcuts would not only lead to a bigger tax return but also greatly reduce the amount of tax taken from an income
Mr Muscat said one of the best ways for someone to reduce their taxable income was to make depreciation claims on investment properties (stock image)
Within two days, the ATO received a whopping 230,000 tax return applications.
More than 457,000 individual refunds were completed by mid-July, towering over the 389,000 claims lodged during the same time last year.
The Australian Taxation Office has allowed wage earners to claim 80 cents for every hour they worked from home between March and September.
The flat hourly rate can substitute the lengthy process of claiming individual expenses, though experts have warned taxpayers could be left shortchanged.
Mr Muscat pointed out workers were losing out on more savings because they simply had no idea what they could claim.
‘If you understand the basic concept, you can claim anything you are using to make an income,’ Mr Muscat said.
‘You can claim after buying, washing and maintaining your uniform.
‘If you do a job where you do a lot of reading, magazines, content relevant that you might buy, or subscriptions, that’s something you can claim.
‘If you work out in the sun, you can claim glasses and hats.’
Australians who have been working on the frontline battling either the bushfires earlier this year or coronavirus are also entitled to claim protective equipment as a deduction.
That includes gloves, face masks, sanitizer, or anti-bacterial spray that have been paid for by retail and hospitality workers.
Mr. Muscat goes on to say homeowners can also claim depreciation on their investment properties.
‘Everyone knows that real estate can be a great tax dodge, but a lot of people forget about one of the biggest parts of how you dodge tax with property and that is depreciation,’ he said.
‘You can claim depreciation because the house is deteriorating and the government gives you figures, and you can claim all that and that can make a huge difference on how much tax you’re paying.’
A homeowner can claim a tax deduction for a rental property as it slowly declines in value over time.
The claim can be made against any structural decline in value or items that are permanently fixed to the home.
In most cases, the Australian Taxation Office will only allow property investors to backdate depreciation by two years.
Homeowners will also have to draft up a depreciation schedule – which involves hiring a qualified quantity surveyor to inspect the property and make a report for the accountant.
Mr. Muscat also said a worker can choose to salary sacrifice to reduce their taxes even further.
‘If you’re making $35,000 or more it’s almost absolutely worth your time to go make the effort to salary sacrifice a certain amount of money each week because you will actually end up with more money,’ Mr. Muscat said.
Salary sacrifice is most often used when a worker opts for part of their salary to be directly sent into their superannuation account before they are paid.
The worker may look as if they are being paid less money at the end of the week, but the lower paycheck could drop their income down a tax bracket.
This means they are taxed less in the end, while more money is essentially going into their super.
Mr. Muscat said workers were overlooking a number of work expenses on their tax returns meaning they were losing out on more money (stock image)
Mr. Muscat suggested another way to reduce taxable income was to start a business (stock image)
Mr. Muscat noted a salary sacrifice could also be made on more things than just superannuation.
‘You will pay for things like a car, or phone with your pre-tax income, so you save money if you understand the fundamentals of tax,’ he said.
Mr Muscat’s final two suggestions for reducing tax was to set up a trust and start a business.
He admitted setting up a trust fund was more advantageous for high-income earners.
He said it would be better for them to put their savings or investments into a trusted person who made less money as that would reduce the amount of tax on their assets.
‘As you make more money, you go up in the tax bracket. If you have a spouse, or someone close to you, and they have a lower marginal tax bracket… and pay less money.’
