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10 Essential Tips for Minimizing Your Taxes in 2023.

Article by WealthSafe.

Date Published: 19 Feb 2023

There’s a great way to minimize your tax and I’m going to share with you 10 tax tips that can really help you seriously flash your tax in some cases, we use tax by 10 20 30%, or even more. Sometimes half of it sometimes even 70%.

1. Meal expenses, client dinners, and being creative – Let’s say that you’re going out for dinner with an important client. Normally, that is called entertainment expenses and you can’t claim it.

However, let’s say the client has specially flown in from Queensland (for example) to see you in Sydney. That client can claim deductions for his food and accommodation because, on interstate business traveling, he or she can claim a deduction.

So you say to the client look, if you pay for the meal, I’ll take it off your bill. Let’s say the client pays for his meal, and you take it off his bill. Effectively the client has got a tax deduction.

2. Self-education and Seminar expenses – As a rule, the Tax Office has strict rules when it comes to claiming deductions for self-education expenses. So for example, let’s say you are a secretary and you do an online course to learn how to make money online. You are not going to be able to claim those expenses because you have incurred them too early in the process of gaining or producing your income.

By contrast, however, let’s say you are a financial planner and have a website that generates you leads (ie. clients). You go and do an online marketing course. Assume he originally did it because he wanted to make money from making further websites unrelated. Provided he can show some benefit to his financial planning business, that is, skills in how to grow leads or improve lead conversion say on the website, he can claim a deduction for the course. The reason is, that the can relate the expenses to his current business.

This flows from the fact the Tax Office (and backed by the courts) have long said you cannot claim deductions for expenses incurred in setting up a new business. However, you can claim deductions for courses/seminars designed to help you increase profits in your existing business.

3. Overtime meal expenses – Let’s say you work after 6 o’clock at night in your business. You run your business through a company, trust, sole trader, or partnership. You can claim a meal allowance according to the ATO ruling as a deduction from your company for basically eating your dinner!

So if you’re employed by your business and have to work past 6 o’clock at night, you can claim your dinner as a tax deduction.

The key is to ensure you structure it properly and in accordance with awards. So make sure you get proper professional advice from an expert accountant.

4. Trips and conferences, especially overseas – If you go interstate or overseas to do work, overseas, or for a business conference, you can claim deductions for your flight and your travel, and the cost of your accommodation. In particular, if you’re going over mainly for business, the cost of claiming your flight is 100% tax deductible, even if a part of your trip was for a holiday or a part of it was for fun or pleasure.

So let’s just say you’re going to America for a business conference and five days is for business and five days is for holidays and recreation, but the primary reason you went over was for business (you just added the holiday in the end). You can claim the full flight at 100% and you can claim the rest of the cost of the trip at 50%. And you may be able to increase the claim if you see clients or something similar when over there on the other days.

5. Using reimbursements – Often there are expenses that may not be so easily claimed in your own name, but are more easily related to your income if claimed in your business structure.

Let’s say you have a book on motivational and profit growth and buy it yourself. It may be argued it is personal development for you and you cannot claim it.

By contrast, let’s say you buy a book and your business reimburses you for it. It’s far easier to justify the business getting a tax deduction than you, as it is arguably only a motivational self-help book for you, whereas, for the business, it’s helping you increase your profits.

6. Use family trusts for investing or business – Despite what our beloved government says, family trusts are still a fantastic vehicle to save tax (and protect assets) and are unlikely to be removed in the near future as farmers and politicians all use them! A family trust allows you to split income between the most tax-effective people.

So for example, if a wife earns more than her husband, you give the husband more income from the trust. And in the next year, if the husband earns more income, then you give the wife more income from the trust. Or if both are earning a lot of income, you can put it into a company and only pay 30%.

Family trusts are still one of the best ways to minimize tax today.

7. Use bucket companies to keep the tax at 30% – Let’s say you earn a huge amount of income on your family trust like $500,000 – %1,000,000 dollars profit. Potentially you’re going to be up for 40-45% tax.

What you can do is distribute to a “bucket company”. That is, you pay the money across to the company from the family trust and keep the tax at 30%.

So, let’s just say you distribute $1,000,000 to yourself, you might pay $450,000 in tax. Through a bucket company, you’ll pay only $300,000. So very effective.

One hidden trip with a bucket company is if you pay money out of it to yourselves personally. You need to ensure you have special loan agreements called “Division 7A Loan Agreements” (ask your accountant about them). Otherwise, you could end up with a nasty tax shock of 76.5%.

8. Using superannuation, especially self-managed superannuation funds, in a lower-taxed environment – Again, super funds only pay 15% tax as a rule (apart from certain exceptions).

So, let’s say you’ve got a lot of profits in your business. You can pay up to $25,000 each for you and your partner into superannuation tax deductible and only pay 15% tax that year. And you can contribute up to $450,000 non-tax deductible every 3 years.

So let’s just say you decide to put $25,000 into superannuation. You only pay 15% tax on that money. It makes a big difference in compounding and growing your wealth more rapidly.

9. Keep your receipts in a top record-keeping system to easily find them – You can use dropbox or some kind of computer-automated system to keep your receipts.

So, very simply, if you have messy receipts, it will take a long time to find them and if you get a tax audit or need a bank loan, you’ll never find them (who relates to this).

The ATO treats you far more favorably if they see you have really good receipts and you’ve got a really good record-keeping system for your receipts.

I know this from experience myself and my clients. I have seen clients with excellent receipts and records walk away clean and scot-free in a tax audit, with no adjustments, and I had the same experience in my own tax audit.

10. Have a great bookkeeper and lodge your BAS statements on time – Having good financial accounts and a great bookkeeper is critical, as they ensure that your receipts and finances are well organized. That makes a huge difference.

Especially now the tax law has changed so if you don’t lodge BAS statements on time, you can be personally liable for company debts to do with GST or PAYG taxes.

A bookkeeper balances out your profit, loss, and balance sheet, and helps you track your finances, know how much tax is payable, how much money you are owed, etc. I regard a good bookkeeper as essential and very valuable in any business.

So make sure you have a really good bookkeeper and lodge your BAS statements on time!!!

That’s it for now. So there are now my tax tips. I hope that you find it useful.

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