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)
  • 168
    I am in the 45% tax bracket ($190,001+)
Financial Taxation

Comments

    • yourflights on 11/09/2024 - 09:22

      Can you explain this please. Really keen to know, especially the LSL part

      • Lit Homie on 12/09/2024 - 12:42

        They just work less, less income = less tax. Best way to 'save' money as tax is progressional.

  • MrThing on 10/09/2024 - 00:14
    +3

    So anyone on 300k or more is in the 99th percentile, but somehow everyone in this thread earns that

    • hasher22 on 10/09/2024 - 01:35
      +5

      The funny thing is, IMO, I honestly think Ozbargain users are not your median salary workers but more so people with disposable income and higher than median salary income earners.

      Let's face it, 99% of deals which are posted we don't 'need' but people buy because….. capitalism and fomo.

      • smartazz104 on 10/09/2024 - 07:09
        +6

        People don't become well-off by buying things at RRP.

        • freekay on 10/09/2024 - 10:54
          +1

          Preach

        • Eeples on 10/09/2024 - 11:38
          +1

          You’re right it’s more luck, stable childhood, and opportunities.

          (But many claim they are ‘self made’ such a delusion).

          • justworld on 10/09/2024 - 12:32

            @Eeples: The only thing you've said that was valid is a stable childhood. The other things are available to everyone in this country. Anyone who's smart will be invited by their school to skip a grade, go into a gifted and talented program, etc. There is standardised testing in primary school and high-achievers are identified early. If you are academically or musically talented or have elite sporting ability you will get a scholarship to high school. There are plenty of merit scholarships available to university as well. If you are good enough it's easy to succeed. The ones who don't can always find ways to rationalise not being good enough.

        • hasher22 on 10/09/2024 - 11:47
          +6

          People don't become well off buy buying things they don't need.

  • Aerith-Waifu on 10/09/2024 - 04:40
    -5

    Superannuation is good, however you need to be sure you live till the retirement age of 67 for man and 65 for woman.

    I rather enjoy my times now than think about what I am going to do when I turn 67. Who knows the world could be ending in 20 years for all i know.

    Can you imagine a 67 year old doing all the things the young ones are doing? I mean the body just cant take that much climbing, running, hustling etc

    Worst case I sell the house in Aus and live in Thailand, a friend of mine recently moved over there and for $35k a year he lives very very comfortable with full care 24/7

    • jetblack on 10/09/2024 - 08:03
      +6

      Super is accessed at 60. You're getting confused with the aged pension.

      • Eeples on 10/09/2024 - 11:39

        Will it be 60 in 30 years time?

        A known unknown.

        • jetblack on 10/09/2024 - 20:34
          +5

          Absolute tinfoil worry imo. It'd be political suicide for any party to raise the age at which people can access their own money they've squirreled away precisely to be able to retire, hopefully comfortably, at a reasonable age.

          • justworld on 11/09/2024 - 10:05
            +1

            @jetblack: They can do plenty to hit higher earners like increasing taxes on super, though. They've already broken two promises not to do it. Firstly with Div 293 and then with the recent tax penalty on accounts over $3m

            Look for them to more and more raid high earners' super. Australia loves taxing high earners.

            IMO you're better off putting some money away in a discretionary trust, stashing some with your parents/in-laws and spreading out your investments geographically.

            • jetblack on 11/09/2024 - 18:42

              @justworld: Its a false equivalency, imo, to compare those issues to the age to access super.

              It's wild that people worry about earning or having so much more than the average person, as if having their ability to leverage such tax advantages at completely above-average thresholds is going to have them relying on the pension to live.

              • justworld on 11/09/2024 - 21:48

                @jetblack: It's not about relying on the pension to live. It's about weighing up where is best to stick your money for tax efficient harvesting. The pension is a non factor.

          • Eeples on 11/09/2024 - 23:27

            @jetblack: Really?

            It was 55yo for Super release. (In 1999 just 25 years ago the regulation was changed).
            No reason to believe that 60 is set in stone.

            The current 7 year gap between preservation age and old aged pension is a headache for govt as many spend most of it away and then live on the pension.

      • Aerith-Waifu on 10/09/2024 - 18:27

        Right thanks for that, but how many of us can be said to be fully retired by 60?

        • freekay on 11/09/2024 - 07:51

          No-one's going to go after you if you meet the retirement test, get your super out, and then start working again.

  • nightmarez3k on 10/09/2024 - 08:25
    +3

    If you work for a company with leave at half pay take it.

    Better off giving yourself more time in life. This will save you heaps of money in mental health, physical health and time to do home/car repairs.

  • JownehFixIT on 10/09/2024 - 08:35

    96% of all OzB’ers earning over 190k 😂 way to set the tone hahahaha. I wish it was a poll to determine the actual breakdown.

    • freekay on 10/09/2024 - 09:52
      +1

      Was referring to a recurring joke on OzB :)

      • JownehFixIT on 10/09/2024 - 18:56

        🛫✈️🛬
        👋👨👍

        That's the joke flying right over my head, in case that wasn't clear :-)

        • freekay on 11/09/2024 - 07:52
          +1

          Needs more explanation, please. Bonus points for MS Paint diagram.

    • George Washington on 11/09/2024 - 15:13

      Correction 96% of all OzB’ers save over 190k by using Ozbargin

  • niknah on 10/09/2024 - 08:50

    Small company tax is 25%
    At $180k you are paying 29.5% tax overall.
    Ask your employer to pay into a company instead. From there, you can slowly dribble it to yourself in later years if you have a lower income or pay some to your spouse / kids.

    • freekay on 10/09/2024 - 09:57
      +4

      Yes, but then you have to factor in ASIC fees, accounting/audit fees, registering for GST, insurance, company set up fees. And depending on the work you do, you can't just "dribble" to spouse/kids because of PSB testing.

    • Smulder on 11/09/2024 - 17:35

      Google PSI. Employment income paid into a company must be promptly paid out to the individual doing the work, negating any benefit.

  • chuchum on 10/09/2024 - 09:53
    +1

    If you own investment property, prepaying costs like council rates, strata, landlord insurance helps reduce the cost for the current year, though it reduces your deductions for the following year. Some banks also used to offer interest prepayments for 12 months - though I'm not sure if that's still on offer.

    • Koolness on 10/09/2024 - 11:03
      +1

      Good tip, we did this in an FY where we sold off one of our IPs. Prepayed those costs for our remaining IPs to reduce our tax bill.

    • duchy on 10/09/2024 - 11:53
      +2

      I wouldn’t prepay interest on IP:
      1, it means you need to be on fixed rate
      2, greatly reduces your options to switch lenders
      3, you need to continue prepaying again and again each year or you’ll end up with a year with no interest deductions (yet with rental income)
      4, If you sell mid-cycle you will pretty much forfeit the prepaid amount

      Not worth the headache.

  • Lastchancetosee on 10/09/2024 - 10:09

    Extra super contributions, fringe benefits (car lease, parking), pretax workplace giving, charities.

  • atwilliams on 10/09/2024 - 10:47
    +5

    In addition to the above, if you have a partner (as recognised by the ATO), make sure any investments are held by the person with the lowest taxable income.

    It's simple to do with savings accounts or TD's, but it may not be worth transferring assets if they are already held by the higher taxable income person, however, if you are in a long term relationship, consider how to structure new asset purchases to minimise future tax. This is may be particularly useful for single income younger families.

  • OzzyOzbourne on 10/09/2024 - 13:34
    +2

    Seems like only 44% of ozbargainers earn over $190k so far.

    Regarding reducing tax, ask any of the large energy companies how they manage to take our gas, mostly royalty free, sell it for billions and pay little to no tax, despite using tax payer funded infrastructure, public officials, politicians and often leaving the tax payer with the clean up bill.

    On a side note, despite being the largest gas producer in the world (similar to Qatar), we have a gas shortage and will have to buy it back at an inflated rate.

  • rickb on 10/09/2024 - 14:42
    +1

    Lots of Ozbargainers at the high end of town!

  • eek on 10/09/2024 - 14:52

    Mostly negative gearing on investment properties, some work related expenses and super contributions, but to be honest there are minimal ways to reduce tax as a PAYG employee. Always end up with a 5 figure refund at the end of each financial year though.

    Have looked into a novated lease for a FBT exempt electric car, which makes financial sense (200k+ salary range) but still enjoy tinkering with gasoline engines too much to make the switch.

  • R4 on 10/09/2024 - 15:11
    +2

    Max out super contributions - and if your super balance is less than $500k, you can go back up to 5 years and pay in any unused maximum contributions for those years.

    Buy investment property. I no longer do this as it was more hassle than worth (at the time) but it may be a good option for some.

    • Aerith-Waifu on 10/09/2024 - 18:29

      My income is only 110k, apart from my normal employer contribution, I dont add anything to it.

      So whats the maximum I can add myself if I want to take the full advantage of the 5 year rule?

  • arescarti42 on 10/09/2024 - 15:40
    +5

    Borrowing to invest.

    I'm slowly turning the loan on my PPOR house interest deductable by redrawing and buying shares.

    • Aerith-Waifu on 10/09/2024 - 18:29

      Shares? Thats dangerous……..unless you are buying bhp, fmg, cba and woodside

      • illusion99 on 10/09/2024 - 20:53
        +2

        The average rate of return over a timespan of 15+ years on share market is 8-10% a year. Not that dangerous if you are there for the long term. Where do you think your super is invested in?

    • James tee on 11/09/2024 - 00:43

      I've read a little about this debt recycling but can you explain it for me?

      • freekay on 11/09/2024 - 07:57

        In simple terms:
        Interest payments on your PPoR is not tax-deductible, whereas interest on a loan for investment products (e.g. shares) is fully tax-deductible.

        The catch-22 is your ability to pay back more than the minimum on your PPoR, because any excess is then drawn down on the investment loan side to purchase more shares. Over time, your PPoR loan goes to zero, and your loan on investments increases (this should also correspond with more shares being purchased).

  • Noophe on 10/09/2024 - 21:43

    Novated lease a sub 35k car that's already depreciated (maybe 3 year old car)

    Lease repayments are low, inflate running costs through the roof. Run receipts through 10x to recoup money from your salary sacrifice account

    Profit

  • mungicide on 10/09/2024 - 22:03
    +1

    Debt recycling

  • ComfortablyNumb on 11/09/2024 - 07:31

    Family trust, disperse income from investments to partner, children / lower tax bracket.

    Negative gear investment property.

    Super contributions.

    Salary packaged vehicle.

    Don't over complicate it.

  • easternculture on 11/09/2024 - 07:54
    +1

    Start a wallah cuz fully sick cash only business

  • knk on 11/09/2024 - 09:16
    +2

    I pull 25k in rental income in cash to avoid it lmao
    (dual living home)
    Oh, you said legal.

    • nobro25 on 11/09/2024 - 13:16

      So your properties… Positively Geared?

      • knk on 11/09/2024 - 13:46

        If I look at it investment wise….

        the dual living split cost maybe $8-10k and a lot of my time and sanity. I'm in the green as of just about now actually.

        Tax free income / no deductibles, I'm out only ~$30 a week on my mortgage, plus rates / bills etc.

        If you consider the fact I'm living here and add the value of that (this space would rent for $300-350pw bills included), definitely positively geared. I'm more happy that I can take a drop in income and still survive honestly, that's the whole reason for this (career change in my 30s).

  • Shengh1001 on 11/09/2024 - 09:54

    Self education deduction

  • shaybisc on 11/09/2024 - 11:06

    Donate to the IPA of course.

    • Eeples on 11/09/2024 - 23:38

      Indian Pale Ale.

      How.

  • nobro25 on 11/09/2024 - 13:15

    Is it worth it to get a second Job if my pre tax income is $52k?

  • bailbondsh on 11/09/2024 - 14:17

    "With 96% of all OzB’ers earning over 190k" Wow and yet not suprised at all. Mostly consumer throwaway items, stingy as with their money. Thanks for the statistics. I'll jog on don't worry :)

  • George Washington on 11/09/2024 - 15:14
    +2

    Not answering my accountant phone call or ATO notice letter

    • freekay on 11/09/2024 - 16:42

      That's a yeh, nah from me.

    • Hangryuman on 11/09/2024 - 16:48
      +2

      'Minimizing tax is stealing from the community'

      Kerry Packer disagreed - saying he minimises his tax as every sensible person should

      but if you want to pay more tax and hope for a reward in the afterlife - please let us know how that works out for you - send us a ghostly message by moving the furniture in a positive direction, k ?

    • changyang1230 on 11/09/2024 - 19:37
      +4

      You are confusing tax minimisation and tax evasion.

      Tax minimisation is LEGAL and appropriate application of all legal provision of deductions and structures to reduce one's tax obligation. If you bought printer for home office use and forgot to claim it on tax, it's entirely appropriate for you to minimise tax when your accountant says "you should claim it".

      Tax evasion is ILLEGAL means of reducing tax by omission, misrepresentation, misreport etc, which is entirely different matter altogether. If one evades tax using these means, then yes they are "stealing".

    • TightAl on 12/09/2024 - 08:31
      +1

      Google how your NDIS money is being spent :)
      All those NDIS frauds are living very well and you want to contribute more?!

      From time to time I deal with the govt, they will literally put Tenders out and pay MORE for an identical item. Great use of tax dollars.

  • Hangryuman on 11/09/2024 - 16:44

    quick tip - beware of capital gains tax (CGT) - after selling investment real estate - even if your normal taxable income is in a lower marginal tax bracket, once your total taxable income for the FY exceeds $190K you're looking at 45% tax on anything over $190K

    e.g. if the rest of your taxable income was $45K which would have been in the 16% marginal tax bracket, anything over $145K of taxable capital gain (assuming counting only 50% of it, of say $290K, if held for more than a year, etc.) bumps you up to the 45% marginal tax bracket.

    • fredblogs on 11/09/2024 - 22:03
      +2

      what's the tip though

  • ar7ist on 12/09/2024 - 11:53

    Curious to learn, what sort of experience / roles people have that are earning 190k+

  • MrThing on 12/09/2024 - 12:38

    woo 0%, how do I get more DOLE money

  • HardQuiz on 15/09/2024 - 08:34

    ATO?

    Never heard of it.

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