Stop Overpaying Tax: 4 Strategies the ATO Actually Approves
While your trusted accountant focuses on maximising your entitled tax refund, you should put in place specific relevant strategies to reduce your tax. Under ATO guidelines and rulings you may be suitable with implementing some of the strategies below
Salary Sacrificing
Currently your employer is required to pay you 12% on your ordinary earnings
You can choose to direct a portion of your before-tax salary into your super fund on top of the compulsory Superannuation Guarantee (SG) known as salary sacrificing. You can select to sacrifice your wage at any stage during the financial year and works best when staggered with your pay cycle.
Benefit: Instead of being taxed at your personal income tax rate (up to 47%), the sacrificed amount is taxed at a concessional rate of just 15% within the fund.
Example: A person earning $150,000 p/a and salary sacrifices $10,000 to superannuation would save $2,400 in tax paid ($3,900 in own name less $1,500)
Maximise Carry forward unused Concessional Contributions
You can use the carry-forward rule to add your unused before-tax super contribution caps from the past five years to your current annual cap, as long as your total super balance was under $500,000 on June 30 of the previous financial year. The annual concessional cap is $32,500
Benefit: Same as above as this is additional amounts you can salary sacrifice or payments you can make. The additional benefit to saving tax, the funds are then invested within your superannuation and could provide a higher superannuation balance.
Example: A person earning $100,000 has $25,000 of unused contributions and can add this additional amount to superannuation would save $4,250 ($8000 in own name less $3750) The savings could be more depending on your Marginal Tax rate
Take out Income Protection
Income protection policies sole purpose is to ensure that you receive up to 70% of your income in the event of injury or illness preventing you from working. However, the premiums are tax deductible which makes the cost of this very important insurance more feasible.
Benefit: Just imagine how you would pay for living costs (mortgage, rent, food, car etc.) if you were unable to work due to injury or illness? Having income protection in place provides this security whilst you focus on recovering.
Example: For a 45 year old female or male working in an office on a wage of $150,000 p/a, the premiums could be as little as $60p/m.
Purchase Property that is negatively geared
Although there has been a large focus in recent months with the Governments announcement of removing negative gearing in Australia, it still remains (rightfully so in my opinion) with new build properties. Negative gearing occurs when the costs of an investment (like interest on an investment loan and maintenance) exceeds the income (rent) it generates. The key focus with this strategy is ensuring that you have the right property which meets these conditions and provides strong indications of future capital growth. You may be reading this now and thinking, what about capital gains, which is fair enough, however it is important to remember you have to earn a profit to be required to pay tax on it and although a problem, I would deem it as a good problem to have!
Benefit: In addition to claiming the difference between outgoings and income, you are also able to claim ‘paper losses’ (building and construction depreciation) and this is critical to have the right accountant. The amount you can claim as a tax deduction and receive as a tax refund could be the same amount as the ongoing cost difference.
Example: A person purchases a property worth $700,000 could have a tax deduction between $20,000 and $40,000 (this depends on loan, interest rate, construction and rent)
Get Your Tax Strategy Reviewed
Reducing your tax isn’t about one-size-fits-all tips — it’s about matching the right strategies to your income, your goals, and your stage of life. Salary sacrificing, catch-up contributions, income protection, and negatively geared property all work differently depending on your specific circumstances, and getting the sequencing right matters just as much as the strategies themselves.
At Blackfox Financial Group, we work alongside our clients to review their position each year, model the impact of these strategies against their actual numbers, and put a plan in place well before June 30 — not after.
Contact our team today or call us on 03 8910 8940 book a tax planning review.
Michael Stratton
Managing Director – Financial Adviser
Your Financial Future Pty Ltd
This article contains general information only and does not constitute financial or tax advice. It does not take into account your personal objectives, financial situation, or needs. Please contact Blackfox Financial Group for advice tailored to your circumstances.
Your Financial Future Pty Ltd is a Corporate Authorised Representative of Lifespan Financial Planning Pty Ltd AFSL No. 229892 ABN 23 065 921 735.