Top Tax Bracket OzBargainers: What Do You Do to Legally Reduce Your Tax Bill?

freekay on 09/09/2024 - 13:35
Last edited 10/09/2024 - 11:00 by 1 other user

With 96% of all OzB’ers earning over 190k, I was wondering if any of our esteemed money-baggers actively worked to reduce their tax bill, and if so, what?

Novated leasing an EV seems like a pretty decent deal these days, but are there any other LEGAL avenues that you’re currently using?

I promise I’m not from the ATO.

Edit - some people have been doubting the veracity of my claims that 96% of OzBargainers earn over $190k. So, to prove me right I've added a poll for you to share how much you earn.

Poll Options

  • 31
    I am in the 0% tax bracket (up to $18,200)
  • 19
    I am in the 16% tax bracket ($18,201 to $45,000)
  • 241
    I am in the 30% tax bracket ($45,001 to $135,000)
  • 160
    I am in the 37% tax bracket ($135,001 to $190,000)
  • 167
    I am in the 45% tax bracket ($190,001+)
Financial Taxation

Comments

  • Jake D on 09/09/2024 - 13:38
    +61

    Max out super contributions

    • tsunamisurfer on 09/09/2024 - 17:56
      +20

      That only works for a little, then I got hit with Division 293.

      • Aureus on 09/09/2024 - 19:10
        +6

        Still works after Division 293, just less so.

        • Salternative on 09/09/2024 - 21:17
          +12

          15% benefit( 45% - 15% super tax - 15% div 293) to lock the funds away for another 30 plus years , yeah nahhhh, not very attractive

          • YRT on 09/09/2024 - 21:25
            +6

            @Salternative: That div 293 only applies to > $250k portion

            It can be attractive with SMSF shares and ETF imo. Not many business can give a 15% return

            Plus, if you are an Australian PR only and a non citizen, it is not impossible to take out the money before retirement

            • OzFrugie on 09/09/2024 - 23:10

              @YRT: I didnt know about this. Whats the difference being a PR vs citizen in terms of super, esp taking money out as u mentioned?
              Any other difference in super treatment between being PR vs citizen?

              • unwashed00 on 10/09/2024 - 09:20

                @OzFrugie: There is none. There's difference before a person get PR: they can leave permanently and have their super withdrawn, though taxed heavily

              • YRT on 10/09/2024 - 09:43

                @OzFrugie: I have not attempted this myself and not 100% on this - as long as you are willing to leave Australia for an extended period, then reenter the country as a visitor and not with your PR visa, you would have qualified for ATO's super withdrawal criteria. It is also possible to reclaim the PR status later as a former PR holder. Taxation wise it's not worth doing.

                Though if you're taking your $10m overseas and never return.. I'm sure there is a better plan lol

            • Salternative on 10/09/2024 - 06:37
              +1

              @YRT: up to $250k, carry forward contribs are definitely worth it. once over $250k, it becomes less attractive with the cost benefit scenario of locking a chunk of your cash for 15% gain compared to other avenues like using that cash Interest in advance , capital works on a property ( if available)etc. Plus if you use a large carry forward contribution, it can affect your ccs or any benefits you have been getting inadverently , as your adjusted taxable income goes up . Would be interested to know how it would affect the smsf shares and etf gains >$250k ( a share wash?)

  • Dollar General on 09/09/2024 - 13:41
    +28

    As mentioned above, max out your $30K super contribution.

    Taking out a novated lease just to reduce tax is something a leasing company says

    • freekay on 09/09/2024 - 13:52
      +10

      Maxing out contributions works for lower tax brackets (or those who have just made across the line into top bracket). If you're earning big numbers (and getting the 11.5% in super) you'd likely only be able to SS $2-3k into super before maxing out your cap…

      • gromit on 09/09/2024 - 16:29
        +4

        yep it sucks, you think you have finished your taxes then you get your Div 293 tax bill. You would think the ATO would be smart enough to work this shit out when you put your tax return in rather than later.

        • jace88 on 10/09/2024 - 14:20

          Does anyone actually pay their Div 293 using post tax income or do most people just nominate to take it from their super?

          • gromit on 10/09/2024 - 18:38
            +1

            @jace88: No idea, going back a few years I just paid it as Div 293 came many months after tax return and usually during holidays when I could not be bothered dealing with it, also regardless of whether you pulled it from super you used to have to pay it up front as it took way longer than the due date to pay it from super. going back the last 4 or 5 years though I just elect to take it from super.

      • Salternative on 09/09/2024 - 17:11
        +1

        Yup above the max pre tax contrib base, they get you with div 293 anyway, the voluntary contribution also adds up to your ATI which can play havoc with CCS and any centrelink benefits if you are not careful , if someone has been earning decent for last few years, they likely wont have much of the carryover amounts anyway.

        • Grunntt on 10/09/2024 - 10:29
          +1

          above the max pre tax contrib base, they get you with div 293 anyway, the voluntary contribution also adds up to your ATI which can play havoc with CCS and any centrelink benefits

          What are these Centrelink benefits you can get with that level of income?
          Why would anyone on the level of income being discussed feel the need to accept Centrelink benefits?

          • Salternative on 10/09/2024 - 10:43
            +1

            @Grunntt: Childcare rebates, Parental leave payment

            • Grunntt on 10/09/2024 - 10:49

              @Salternative: Parental Leave payment -

              To get Parental Leave Pay, you must have an individual adjusted taxable income of either:
              $175,788 or less in the 2023-24 financial year
              If you don’t meet the individual income test, you can use a family income test.
              You can get Parental Leave Pay if your and your partner’s adjusted taxable income is either:
              $364,350 or less in the 2023-24 financial year

              Div 293 cuts in higher than the individual income test limit so that payment wouldn't be available anyway would it if you're effected by Div 293?

              • Salternative on 10/09/2024 - 11:11

                @Grunntt: PLP would be normally applicable for Family ATI as you pointed out above ( one high earner and one on lower income due to mat leave).
                If there are two kids in childcare, the childcare rebate increase can be substantial ( although TBF, from this FY its much better , though crossing the $356 k or so i think in ATI combined would lead to loss of the discounted rebate for the second kid)

  • Fredfloresjr on 09/09/2024 - 13:41
    +8

    EV, Super, Meal entertainment, $16k+ Fringe benefit.

    Maximising pretty decent. Ended up utilising at least half.

  • bmxr on 09/09/2024 - 13:46
    +6

    Family trust, donations to charities.

    • Save 50 Cent on 09/09/2024 - 20:04

      “Charities”?

      • smartazz104 on 10/09/2024 - 07:03
        +14

        Yeah like The Human Fund.

        • BobCobb on 12/09/2024 - 13:17
          +3

          "Money for people".

      • Vita85 on 12/09/2024 - 13:59
        +1

        Yeah, those places that run like a business, take up to 90c to the dollar for themselves and then pretend to do something for the disadvantaged. Also known as a scam.

    • CalmLemons on 10/09/2024 - 21:23
      -1

      The accounting and increased land taxes with a family trust should be looked into first, as they can be astronomical - accountants best friend.

    • gezza90 on 11/09/2024 - 11:10
      +1

      Just make sure the "charity" is registered as DGR under ACNC.

  • Gervais fanboy on 09/09/2024 - 13:51
    +1

    Pre-paying payments on a business loan this year, as I’ll mostly be travelling next year and wouldn’t be earning much anyways.

  • 4foxache on 09/09/2024 - 13:54
    +11

    Investment properties mainly negative gearing and depreciation reports. General repairs etc always add up are tax deductible. That would be the bulk of my refund.

    The rest comes from WFH arrangements and cost sharing utilities and equipment etc used to support the home office.

    • Tommyaka on 10/09/2024 - 11:24

      Capital works deductions for investment properties definitely add up.

      For me personally it's a deduction of $6,000 per year for expenses I haven't even technically paid for yet (thanks to having a mortgage).

    • nedski on 11/09/2024 - 14:44
      +1

      I couldnt believe it when my accountant told me about depreciation reports for my property. Its a bit of a rort but has been a money saver.

  • MS Paint on 09/09/2024 - 14:01
    +9

    Spouse super co-contribution for when MrS Paint wasn't working. I get a tax refund and her super goes up. Win win.

    • EightImmortals on 09/09/2024 - 16:12

      Isn't that capped at 1K pa? (or thereabouts?)

      • Salternative on 09/09/2024 - 17:04

        I think its only an offset of $360 or so, plus spouse loses her eligibility for the government co contribution for super ( $500 max), the government co contrib is much better is spouse is on low income

      • MS Paint on 09/09/2024 - 17:44
        -3

        Not sure. Haven't claimed it in 15 years. Maybe it was more lucrative back then.

      • Grunntt on 10/09/2024 - 10:34
        +1

        I believe $3000 contributed to spouse can result in $560 tax offset

        Spouse Contribution

        • supersabroso on 10/09/2024 - 11:35

          This is a good thread, just found out. Yep, $3k limit in a max $540 refund at 18%. However, it's only up until $37k, after that it reduces down to zero benefit once your Mrs earns $40k+.

          • Grunntt on 10/09/2024 - 18:25
            +1

            @supersabroso:

            However, it's only up until $37k, after that it reduces down to zero benefit once your Mrs earns $40k+.

            Works well for those with a non-earning (or minimally) spouse/partner. In my case the full offset each year makes it definitely worthwhile.
            Also, the bit that is often overlooked, is that it is a tax offset (not a deduction) so the full amount is offset.

  • haydoz on 09/09/2024 - 14:02
    -1

    Leverage leverage leverage

    • twig on 10/09/2024 - 20:24
      +3

      Bro having a Ballmer moment

    • fredblogs on 10/09/2024 - 20:25

      and buy what?

      • freekay on 11/09/2024 - 07:42
        +3

        High yield Mercedes

  • ihbh on 09/09/2024 - 14:02
    +4

    Retire early.

    Split income.

    Defer CGT if sensible to do so.

    Super.

    • MS Paint on 09/09/2024 - 14:03

      Income splitting is a thing in Australia?

      • mskeggs on 09/09/2024 - 15:55
        +13

        If you have discretionary sources of income, like a family business, investments etc.

  • mbck on 09/09/2024 - 14:02
    +57

    I called ato and told them i'm a sovereign citizen. Never had to pay tax anymore

    /s

    • Megatron on 09/09/2024 - 21:58
      +4

      Out of curiosity, as a SovCit do you also abstain from using any Govt benefits, roads, schools, medical facilities etc.?

      • SlickMick on 10/09/2024 - 08:33
        +1

        I was just reading about the vatican. Sovereign when it comes to not paying taxes, import duties etc, but has no hospitals.

        Seems like the way to go.

      • AustriaBargain on 11/09/2024 - 20:53

        Hey, if an imaginary government with no lawful power over me wants to give me money and pay for the roads I drive on and hospitals I rely on, I won't stand in their way.

        • Megatron on 16/09/2024 - 14:56

          that same imaginary government sets out the rules for collection of taxes so that these facilities can be built and run.. so technically what you are saying is, you do not want to pay taxes but will use the facilities built by government using taxpayers money? that is called hypocrisy.

    • MrThing on 10/09/2024 - 00:08

      I do the same. works a treat

    • mrdean on 16/09/2024 - 15:16
      -1

      https://archive.org/details/language-of-babylon

      Kick back and enjoy.

      /not s

  • Duckie2hh on 09/09/2024 - 14:03
    +21

    With 96% of all OzB’ers earning over 190k

    Woweeee. Feels bad to be poor.

    • netjock on 09/09/2024 - 14:08
      +11

      Nah. They count their crypto profits which they never sell.

      Where is that OzBer who put their pay check into crypto. Then put it in Voyager / Celcius and got a loan against it to live on. Die with a load of debt but don't have to pay CGT. Then Voyage and Celcius went under and they went missing.

      • Crow K on 09/09/2024 - 15:08
        +10

        Rekttrading, who lacked a basic understanding of the tax rules and hadn't done the maths on what sort of returns you would need to leverage to consistently borrow against the same investment.

        Luckily neither of these issues prevented them from telling us all how it all worked and what "the feds" were able to do.

        Rekttrading was last seen touring the speaker circuit of Outer Find Out.

        • smartazz104 on 10/09/2024 - 07:04
          +4

          I mean look at his username, he could actually see the future.

        • umoddbro on 10/09/2024 - 17:17
          +1

          He ticked all the boxes of an habitual gambler…. he was pumping ARKK when it was at ATH its dropped 70% since then….

    • MrThing on 10/09/2024 - 00:09
      +6

      100% of whirlpoolers earn over 400k

  • netjock on 09/09/2024 - 14:07
    +5

    Check whether you have carry over for super contributions (up to 5 years) if you have less than $500k super balance.

    ATO link https://www.ato.gov.au/individuals-and-families/super-for-in…

  • Seraphin7 on 09/09/2024 - 14:18
    +9

    There are only two that have any real significance for the general punter … max out your concessional superannuation contributions (although with your employer already plonking in around two-thirds of the limit, the upside is limited from a tax perspective), or have negatively geared investments.

    • leiiv on 10/09/2024 - 09:07

      Isn't the point is to find something that makes you not be "the general punter" anymore?

      • ihbh on 10/09/2024 - 10:35

        Isn't the point is to find something that makes you not be "the general punter" anymore?

        Finding - correct.

        Implementing - generally the ones that implement will not be "the general punter"

  • AngoraFish on 09/09/2024 - 14:21
    +7

    I invest in the Australian film industry.

    • Dollar General on 09/09/2024 - 15:15
      +31

      Onlyfans?

        • Shrynx on 09/09/2024 - 18:40
          -2

          No, hon. Good try! But of course you don't understand so I'll explain it slowly to you. This is a joke directed at a non gendered person and does not use gendered sexist stereotypes to be 'funny' or edgy. The OnlyFans platform is a video, or 'film,' platform, that is being humerously linked to the Australian film industry, which was mentioned in the comment above. Unlike the 'joke' from yesterday, this joke is related to the original comment in a way that doesn't rely on sexism or misongony to be 'funny'.
          There is nothing inherently wrong with OnlyFans or sex work if all adults consent.
          I am not going to engage in a discussion with you about this because you are clearly acting in bad faith. Tagging me in any more threads like this will result in me reporting you for harassment as I am now being clear that I do not want to interact with you going forward. I find you abhorrent.
          Again, I do not want to engage with you any further.

        • onetwothreefour on 09/09/2024 - 19:08
          +4

          Trying to put the pieces of this puzzle together to get some context…what was said in this deleted thread? https://www.ozbargain.com.au/comment/15679242/redir

  • jv on 09/09/2024 - 14:26
    -1

    what do you do to LEGALLY reduce your tax bill?

    Base yourself in Monaco

  • jv on 09/09/2024 - 14:27
    -3

    Novated leasing an EV seems like a pretty decent deal these days

    🤣🤣🤣

    • freefall101 on 09/09/2024 - 16:00
      +22

      EV novated leases is the biggest middle-upper class tax break available in this country. I seriously don't get the OzBargain hate for it.

        • freefall101 on 09/09/2024 - 16:15
          +14

          I did. It is a massive saving over purchasing outright. For me it was cheaper to buy a new EV than a used Corolla when accounting for the fuel savings.

            • freefall101 on 09/09/2024 - 17:31
              +4

              @jv: Going to have to ask you to show your workings here.

          • jv on 09/09/2024 - 16:47
            -7

            @freefall101:

            when accounting for the fuel savings.

            Fuel is tax deductible for business.

            • freefall101 on 09/09/2024 - 17:32
              +11

              @jv: The entire car is tax deductible for a business. It's why being able to pass that on to an employee without FBT is so incredibly valuable.

                • freefall101 on 09/09/2024 - 17:42
                  +5

                  @jv: You love that emoji, don't you?

                  That's all this is, salary sacrificing for a vehicle so there's no GST, no FBT and none of the usual requirements.

                  The company gets a deduction for paying the salary, the employee saves the GST and doesn't pay any income tax. It's the same thing, only you're too daft to see it.

          • 2esc on 10/09/2024 - 08:28
            +1

            @freefall101: Might have to redo your sums but i suppose it depends on how your calculating the used Corolla.

          • supersabroso on 10/09/2024 - 11:39
            +3

            @freefall101: I would watch their dodgy maths if I were you. Many novated lease companies are crooks who charge 14% and you would literally be better off getting a 3 year loan at 4.99% with SWSCU. However, for EVs even the worst company (largest and most popular one) seemed to only take 90% of all your tax benefits and you still get to keep 10% making you better off as long as you don't leave your job within 5 years. For ICE cars, only do a 1 year term, stay away from their money sucking 5 year term where they gouge you for 100% of your tax benefits and more.

            • freefall101 on 10/09/2024 - 12:36
              +3

              @supersabroso: I’m a chartered accountant, I do my own financial calcs.

              First thing I asked them was what the interest rate is, what fees there are and read the terms. It’s a financial product, they can’t hide it from you. The exit terms aren’t great but the cost isn’t too high to just sell the car and bail out, or refinance it (assuming a lender will do it).

              It’s also possible to take the lease to a new provider. The changeover was painful, although it was made worse by me not telling the lease company until the day I left.

              No idea why anyone gets an ICE vehicle as a novated lease, those were always awful. You save GST, that’s it. The rest if it was business use you could claim it anyway and personal use has FBT.

        • changyang1230 on 09/09/2024 - 16:16
          +22

          I happen to have done lots of maths in this area, and can positively confirm that EV novated lease is significantly advantageous for top tax bracket earner (as long as they are aware of a few caveats).

          https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu

          What's your maths that contradicts my finding? Keen to hear back.

          • bobswinkle on 09/09/2024 - 17:14
            +16

            @changyang1230: You're wasting your time trying to reason with JV. Once he thinks he's right facts don't matter.

            • changyang1230 on 09/09/2024 - 17:15
              +8

              @bobswinkle: More for the benefits of other passing readers who are interested in actual maths I guess.

              • bobswinkle on 09/09/2024 - 17:24
                +2

                @changyang1230: Good call. FWIW I also did a lot of maths and came to a very similar finding.

            • lunartemis on 09/09/2024 - 22:17
              +2

              @bobswinkle: @bobswinkle - isnt JV female??

              • SpainKing on 10/09/2024 - 15:59
                +1

                @lunartemis: I used to think that too, I've now come to realise JV is an enigma

          • donga100 on 09/09/2024 - 19:27
            +11

            @changyang1230:

            What's your maths that contradicts my finding?

            JV doesn't like EVs as they are too woke.

          • daft009 on 09/09/2024 - 20:27

            @changyang1230: would love to see some maths.

            people are telling me thats its great, but i see no evidence I can work off.
            (that reddit link doesnt open, says reddit's IP could not be found)

            PM me if easier please :)

            for me its an existing ICE vs new EV

            • changyang1230 on 09/09/2024 - 20:33
              +10

              @daft009: Can you try on another platform? I have tried on both my laptop and my phone and the link opens alright. And judging from the upvotes people seem to be able to use that link ok.

              Reposting here.

              https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu

              To summarise the basic principles.

              • ⁠you fund the car with pre-tax money - only final balloon payment is from post-tax money

              • ⁠you fund the running cost (electricity, insurance, rego, service, tyres) with pre-tax money

              • ⁠you get GST-exemption (up to 6191.64 dollars for the car, and all GST for running cost)

              • ⁠not forking out cash outright means more cash in the offset which helps reduce interest in home loan. In other words, if you spend 70,000 from offset account to buy a car outright, assuming home loan interest is 6%, each YEAR this missing 70,000 would have incurred additional 4200 dollars in home loan interest. When you NL, you don’t incur this additional interest until much later.

              • ⁠yes you will be slugged with interest as part of NL arrangement (anywhere from 8 to 16% by the NL companies), however most of the time this is more than offset by the fact that you pay it using pretax money.

              Paying for anything pre-tax is equivalent to receiving a discount equivalent to your tax bracket. E.g. if your bracket is 45 + 2% (medicare levy), then paying 1000 dollars using pre-tax money is equivalent to spending 530 dollars post-tax. Therefore, the higher your tax bracket is, the more saving you achieve via novated leasing. 

              • daft009 on 09/09/2024 - 20:47
                +1

                @changyang1230: thanks mate.

                got the link to work!
                doesnt apply to me as I'd buy it under my own company.
                No N.L would be needed

                • changyang1230 on 09/09/2024 - 21:03
                  +2

                  @daft009: If you have your own company and can claim the car to significant percentage of business use then it’s probably not much benefit to NL.

                  What some people do is to get the car under the company and then give the car to the director (i.e. you) as a fringe benefit.

                  I don't know whether there's any real advantage to do that however as I am not overly familiar with accounting of companies; it's best to consult an accountant to see if there's any value around that.

                  • pangwen on 10/09/2024 - 07:19

                    @changyang1230: My understanding is that purchasing outright in a company is better than NL because you don’t have the NL company taking a cut of your savings through the high interest rate.

                    Obviously depends on whether you have enough cashflow in the business to purchase the vehicle upfront, and there are some annoying bits with car registration when you’re buying as a business.

                    • changyang1230 on 10/09/2024 - 19:00

                      @pangwen: Half of the "saving" achieved via NL is the fact that you don't have to fork out the lump sum in the beginning, and that lump sum can be used to invest / left in offset to save interest.

                      In the case of the company, is there a similar mechanism of "not forking out lump sum" for similar type of saving? Do companies just borrow money but then deduct said money / its interest in their tax?

                      Not that familiar with how company tax works hence I wasn't that sure how it compares directly with novated lease scenario.

                      But yes, the lack of someone taking a cut of interest is definitely a big one.

              • FezMonkey on 13/09/2024 - 08:51

                @changyang1230: Something I haven't seen explained is whether the costs of installing the charging infrastructure at home are part of the pre-tax funds?

                • changyang1230 on 13/09/2024 - 10:59

                  @FezMonkey: Unfortunately then don’t let you claim home charger as part of pretax novated lease expense. 🤷‍♂️

        • nikey2k27 on 11/09/2024 - 18:03

          people at work keep tell me id10t for have novated leases. why leases a car went can just own one.

      • changyang1230 on 09/09/2024 - 17:31
        +8

        To be fair there's quite a few trapping of NL that many people fall for / did not consider when they sign up.
        - headache when losing / changing job
        - failure to consider balloon cost
        - failure to consider the impact on childcare subsidies / HECS etc
        - failure to consider reduced borrowing capacity for house etc.
        - got hit by reduced super guarantee (happen to a small proportion of people, most people aren't affected)
        etc
        - not realising the big difference FBT exemption makes compared to FBT-applicable era when NL actually was NOT that beneficial.

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