How to reduce tax bill?

Taxation noob here. What are some strategies to your reducing tax bill?
We have no debt, no mortgage ( we rent ) and no assets as such apart from 2 cars and a small amount of shares ( 3k worth )
Our savings are in our bank accounts ( approx 100k ) not sure if that is relevant but just wanted to give the whole picture.
I know of super contributions but looking at what else could be an option for us.
Would like to buy a new ( second hand ) vehicle next year I believe there may be a way of repayments being pre taxable income....? But generally looking to find out any/all ways we could minimise how much tax we pay.
Thank you all

 

Shouldnt you be focusing on increasing assets? You have about 100k cash and nothing else.

 

Agreed and we are but still figuring out best strategy for that one especially considering where the property market is currently at nationally
Also, I don't feel our position is really that bad....having assets isn't the be all and end all. Have friends with properties hence mortgages living week to week with no savings and an "asset" that is worth less than what they paid for it 5 years ago....

 

For tax advice a tax agent may assist

Tax comprises less than income. eg even at the highest tax rate the amount earned is only subject to 47% tax. Tax is generally based on a set scale and little can be achieved by reducing tax since that implies either earning less or spending more. Both affect investment capacity and wealth.

The true focus should be on : how do I increase income ?

100K wont normally be sufficient to get on the property ladder but may be a good start point to consider planning it.

 

• Earn less money through PAYG
• Become unemployed/don't work/work fewer hours
• Put savings in low/no-interest bank account
• Donate to charities/the arts
• Purchase depreciating capital assets/sell them at a loss
• Purchase shares in companies prior to them being suspended and ultimately delisted

 

Reduce income and/deductible expenses are the only 2 ways. But many subsets of these to consider

 

Thanks Paul. In Perth 100k can easily get us on the property ladder but holding off for now. I am in touch with a tax agent that I am hoping can help but is at capacity for a few weeks so am waiting until they have time to discuss.

 

Just looked up an old thread on novated leases, doesn't seem like a great option...especially as we wouldn't be buying new

 

buying a depreciating asset is never a good idea. However if you are going to buy one eg a car then an accountant can advise you on the most tax effective way for you to do this. Building assets is the best way to accumulate wealth. Minimising tax is a strategy but it is not a plan. Just my 2c

 

Cars can also really tie up servicing since novation dumps the debt on you, not the employer. Ranks up there with charge cards as a loan killer.

 

Wealth destruction/avoidance 101, highly effective way to minimise tax.

 

1. Earn less ? This is a income reduction strategy. Tax savings are less than the income.
2. Same. Both impact servicing and lifestyle
3. Why ? Why not put in name of low income earning spouse ? Or use an offset
4. Donations save tax but at the expense of cashflow. The savings are marginal. For each $1 in tax $3 of income may be required.
5. Not unless its a business. Wouldnt NOT buying them preserve cash ? Its akinb to a strategy of paying me so my fee is deductible. I'm happy to allow you to spend $20k on tax advice.
6. Wrong. CGT losses dont reduce taxable income. Ultimately a CGT loss may occur when they are liquidated, not when they are delisted or suspended. It will carry forward to offset a future gain.

Losing money isnt an income tax or wealth strategy.

 

Always happy to be corrected , doesn't the loss reduce the ultimate tax paid when offset against a taxable CG event?

 

Sometimes. Its not tax efficient either since the full loss offsets the full gain. The 50% discount can be lost in this process

Losing money doesnt make money

 

Assets aren't everything, but at current interest rates, surely you would be paying similar in rent than the interest on a P&I OO loan + rates for the same property? Unless you're in a very expensive area. And there is more upside than downside risk to price movements over the next 5+years.
With it being an absolute buyers market, rents set to increase and FHB not having to pay stamp duty, why would you not buy a home in Perth soon? I'd be keeping an eye out for that perfect house to pop up if I were you. And you minimise tax in the long run in that any capital gains are tax free whilst the asset is a PPoR, whereas interest you earn on cash is fully taxed.
Just my 2c

 

Thanks Rex! Yes our rent is very modest, $125pw each for our 3x1 on 1,000sqm in Floreat ( we do have one housemate although I see her maybe once a week if that ) so our rent is much lower than P&I repayments plus we get to live in blue chip and dont have to pay rates etc in saying that we are open to buying a PPOR and I have been looking for one for almost 2 years....still waiting for the right one as I only want something we can either value add to or retain subdivide given Perth is not going to be our long term home ( at this stage anyway )

 

$125pw each. How many of you are there?
What's the total weekly cost for rent?

 

Sounds like $375.

If it was me and you were happy to live where you currently are.

I'd look at where you want to be living in 10 years- house and location.

See how much you can borrow and then look to buy when you are comfortable to do so, rent it out and move in later on. Or use the 6 year rule to your advantage.

You'll never pick the bottom of the market (and I have no idea how the Perth market is doing).

 

Rent is $400 total, housemate pays $150 we pay $250 between us.In 10 years I want to be living back on the east coast on 20+acres ( still convincing partner to leave WA in a few years ) likely to be sunny coast but need to go check it out etc first
Leaning towards maybe buying an IP in Sydney in the next couple of years for now, although we would likely never live in it, as a long term investment Sydney is top pick for me