Top 3 ways to reduce taxation

28/01/2015

Being frustrated with your tax burden is one of those things that's such a given, there's almost no point in talking about it - almost.

In fact, it's crucial to have discussions about it, particularly with a professional like an accountant. You'll find that there are numerous tax planning strategies you can undertake to cut down how much you pay the government. Take these three for example.

Make use of an offset account

We're taxed in a variety of areas, including the interest we earn on our savings accounts. This can make saving somewhat frustrating, particularly when interest rates are low.

Have you considered putting your savings into a mortgage offset account instead? If you're trying to pay off a home loan, your funds here will reduce the amount you owe, lowering interest repayments and helping you pay it off faster - all the while saving on tax.

Keep it in the family trust

A discretionary family trust is one of those age-old methods for reducing your taxation burden. Discretionary trusts allow the trustee to dole out income and assets to beneficiaries according to their own whims and wishes, with no specific, fixed total.

This not only makes for greater flexibility, it also means that tax is applied individually to each person receiving the benefits, rather than the entire trust. According to the Australian Taxation Office (ATO), individuals can also get a 50 per cent mark-down for the capital gains tax.

Give in order to receive

One of the best things about acting charitably is the warm feeling you get when you help someone out. But there are also material advantages to it.

Making charitable donations is tax deductible, so the more you give, the less tax you potentially have to pay. Just be sure to check with the ATO what kinds of donations are tax deductible, and keep accurate records of your giving.