Tax planning might not be the most exciting part of managing finances, but it’s one of the most valuable. By taking a few proactive steps, Liverpool residents can minimise their tax obligations, maximise their deductions, and keep more of their hard-earned money.
Here are some practical and achievable tax planning tips to help you stay ahead and save.
#1. Start Early
Waiting until the last minute to think about your taxes is common but costly. Planning throughout the year helps you make the most of potential tax-saving opportunities. Keep a dedicated space, whether digital or physical, for tracking income, expenses, and receipts.
This habit can save you from a frantic search for documents in June and can reveal valuable deductions you might have missed otherwise.
#2. Maximise Deductions by Knowing What’s Claimable
Knowing what you can deduct is key to lowering your taxable income. Liverpool residents who work from home, for instance, may be eligible for deductions on utilities, internet, and even some home office furniture. Small business owners, tradespeople, and contractors can claim items like tools, travel expenses, and work-related phone costs.
A good tip is to save receipts for anything remotely work-related. Even if you’re unsure about a deduction, an expert can help assess if it’s claimable.
#3. Understand Capital Gains Tax (CGT)
Capital Gains Tax is one of those tricky areas that can catch people off guard. It applies when you sell a valuable asset, like an investment property or shares, and make a profit. However, there are ways to reduce the impact. If possible, consider selling assets over multiple financial years to spread the gain. Additionally, holding onto assets for more than 12 months could qualify you for a 50% CGT discount.
This area is where expert advice can be invaluable, as a tax accountant can help you navigate the best timing and approach to maximise savings.
#4. Use Your Super Contributions Wisely
Superannuation contributions are an excellent way to reduce taxable income while boosting retirement savings. For many residents, contributing a bit more than the minimum can pay off. Contributions you make from your pre-tax income, known as concessional contributions, can reduce your taxable income and may be taxed at a lower rate than your regular income.
Keep in mind, that there are caps on how much you can contribute to super each year. Exceeding those limits could result in penalties, so knowing the rules is essential.
#5. Plan for the Low and Middle-Income Tax Offset
If you’re eligible, the low and middle-income tax offset (LMITO) is a great way to reduce tax. This offset applies automatically when you file your return, but understanding the eligibility range can help you plan for other tax strategies.
If you’re close to the LMITO income thresholds, consider deferring income or capital gains to stay within the range and qualify for the offset.
#6. Keep Track of Work-Related Expenses
From uniforms to travel costs, many Liverpool residents can claim various work-related expenses. However, there’s a catch: you must be able to prove the expenses are directly related to your job, and you should keep records like receipts or logbooks.
Remember that some expenses have usage limits, such as clothing and laundry. A tax accountant in Liverpool can help you determine exactly what qualifies in your situation and make sure you’re claiming everything you’re entitled to without overstepping.
#7. Manage Investments with Tax in Mind
Investments, whether in property, shares, or managed funds, can significantly impact your tax situation. To minimise taxes on investments, consider holding onto assets for at least a year, which may reduce your capital gains tax. Dividends from shares may also qualify for franking credits, which can reduce your tax payable.
If you’re earning a significant amount of income from investments, a tax accountant can suggest strategies to optimise this income and lower your tax bill. They may also advise on using a family trust to distribute income among family members, potentially reducing the tax impact.
#8. Keep Records Year-Round
No one enjoys sifting through old receipts and bank statements at tax time. To make your life easier (and avoid any accidental deductions), set up a system to organise your documents throughout the year. Many apps can help you snap photos of receipts and store them digitally.
Well-organised records can also be a lifesaver if you ever get audited. Having proof for every deduction is crucial, and it’ll help you maximise what you can claim with peace of mind.
#9. Don’t Forget Medical Expense Offsets and Other Credits
Although the medical expense offset has been reduced in recent years, some specific costs, like disability aids or aged care expenses, may still qualify. Additionally, if you’re supporting dependents, you might be eligible for further offsets, lowering your overall tax burden.
Taking the time to understand these credits and offsets can add up. Don’t assume you don’t qualify—check with a tax accountant to be sure.
#10. Consider Charitable Donations
Charitable donations aren’t only good for the community—they’re also tax-deductible if they’re made to registered organisations. Whether you donate cash or goods, keep your receipts. Remember, the donation needs to be over $2 and unconditional, meaning you’re not receiving anything in return.
Charitable donations not only lower your taxable income but can be a great way to support causes close to your heart. Just make sure you’re donating to organisations with Deductible Gift Recipient (DGR) status, so the donation qualifies for a deduction.
#11. Enlist a Tax Professional for Complex Situations
Taxes get trickier as life gets more complex. Business owners, property investors, and high-income earners all face unique tax challenges, and a tax accountant can help navigate these waters. By providing advice specific to Liverpool’s tax environment, an expert can often uncover savings that would be easy to miss.
A tax accountant in Liverpool is especially helpful if you have a side business, rental income, or investments, as they’ll be familiar with local tax laws and exemptions.
Conclusion
Tax planning doesn’t have to be stressful, and it can even save you a significant amount of money when done right. By using these tax planning tips and staying organised, you can maximise your deductions, avoid common mistakes, and enjoy a smoother tax season each year.
So whether it’s learning to track deductions or optimising your super contributions, these steps can help Liverpool residents keep their finances in top shape and make tax time a little less painful.
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