Ideas for reducing Adjusted Taxable Income

Discussion in 'Accounting & Tax' started by Rex, 12th Mar, 2020.

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  1. Rex

    Rex Well-Known Member

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    I am on track to have my ATI this year come in approx $1,500 over the $100K limit after which you lose Family Tax Benefit Part B (worth almost $5K). Obviously not going to let this happen.

    Any ideas for spending and achieving $1,500 worth of eligible deductions? Obvious things like extra investment deductions/losses (e.g. IP costs) and extra super contributions don't help as it's Adjusted Taxable Income, not simply Taxable Income that I'm trying to reduce.

    My income is PAYG salary so I think options are limited - I think things like a new laptop aren't much use due to it being later in the FY and not much depreciation possible this tax year?
    I have the fallback option of just taking a week of unpaid leave before the end of FY to get paid less, but I'm keen to hear if there are any more productive ideas.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Unpaid leave?
     
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  3. Rex

    Rex Well-Known Member

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    Yep as stated, that's the fallback option :/
     
  4. shorty

    shorty Well-Known Member

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    Donate to charity?
     
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    If you reduced your in one by $1500 what would the extra benefits amount to?
     
  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Get coronavirus and take unpaid leave and keep your sick leave.

    Salary sacrifice to exempt benefits...like extra annual leave of 2 weeks
     
  7. thesuperman

    thesuperman Well-Known Member

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    Start share trading as a business (or something similar) and lose a lot of money doing it.

    Buy a very negatively geared investment property.

    Make a tax-deductible contribution on which you intend to claim a personal tax deduction but cannot exceed $25,000 per year.
     
  8. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    That isn't so straight fwd. Non commercial loss test and capital v revenue. Losing money is always a bad idea

    Additional concessional super is one consideration and yes the total is at least 25k (reduced by employer contributions etc) but possibly more as catch up contributions could count.

    My best one...get tax advice
     
  9. Rex

    Rex Well-Known Member

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    FBT part B is a flat ~$4,500 if I earn up to $99,999 adjusted taxable income, and after this it is $0. So basically $4,500 tax free (the equivalent of $7,140 pre-tax income) is lost for earning even one dollar over the $99,999 limit. In my case, sacrificing $1,500 gross / $945 net income gives a $4,500 net benefit. An obvious decision in response be to a bizarre payment eligibility criteria.
     
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  10. Rex

    Rex Well-Known Member

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    Is that a thing? And if so how does this work?
     
  11. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Hi Boss.. Can I exchange some salary from this year for extra annual leave that I can use - Say next year ? ie Can I buy 2 weeks of leave ?

    Salary is $120,000 so employer says 2 weeks will cost you $4615.38. The April monthly payroll gross drops from $10,000 to $5384.62. And your tax drops too :) So you are only out of pocket $2913 Just make sure the employer pays the same super as new laws require.

    Your annual PAYG summary will show $115,385 not $120,000

    Cant I just ask my employer to not pay me in June and pay me in July ? No. This is not a effective salary sacrifice as Fair Work Act rules require you to be paid what you are owed. You cant sacrifice all your income like that.

    Extra super wont actually help as its a reportable contribution whether its on the PAYG summary or if you claim a deduction.

    Another option is a FBT exempt fringe benefit. eg You need a work use laptop. Hey Boss can I sal-sac this ? Your salary drops $2k and so does your tax. They reimburse you $2K. You actual save tax and have more cash in hand (the tax saved) and it means you earned $2K less.

    Just run your numbers carefully. You could do all this and find it doesnt help. The income threshold is 98,999 not 99,999 and then it tapers at 30cents of FTB A per dollar and does not just stop as your described. The upper income threshold (ATI) is approx $104,184 if you have 1 child and then rises for more kids depending on their age/s

    Another benefit of FTB A is the new stimulus incentive annouced yesterday