5 things you can do as a high income earner to reduce tax
Here are 5 things worth thinking about to reduce your tax. Some of them you can implement immediately, others require some consideration and planning.
Capital Gains Tax Planning
Timing asset sales to take advantage of tax benefits like the 50% capital gains tax (CGT) reduction on assets held for more than 12 months may reduce CGT payments. Understanding and using capital gains tax concessions and exemptions may greatly decrease taxes.
There are other ways to minimise or even avoid capital gains taxes, such as taking advantage of primary residence exclusions, among other options.
Negative Gearing
Negative gearing is a tax strategy that involves offsetting the expenses of an investment property against the rental income, resulting in a net rental loss that reduces taxable income. This allows individuals to deduct their loss against other income, such as salary and wages, consistent with the broader operation of Australia’s personal income tax system.
Negative gearing can apply to any type of investment, not just housing, and is based on the expectation that the capital gain when the asset is sold will more than offset the loss.
Invest in Income Protection Insurance
There’s a valuable strategy that many overlook: claiming your income protection premium as a tax deduction. Not only does income protection provide crucial financial security in the event of illness or injury, but it also offers a tangible benefit come tax time.
By claiming your premiums as a tax deduction, you not only safeguard your income but also potentially lower your taxable income, resulting in significant savings. This smart financial move not only protects your finances but also ensures you’re making the most of available tax benefits.
Discretionary Trust
Discretionary trusts are commonly used in Australia for estate planning and asset protection.
In a discretionary trust, the trustees have the discretion to distribute income to beneficiaries. A discretionary trust can reduce personal tax liability by distributing business or investment income to beneficiaries with lower marginal tax rates.
Private Health Insurance
Private Health Insurance in Australia can help high-income earners avoid the Medicare Levy Surcharge (MLS).
If you have any questions or would like to know more about tax minimisation strategies please contact me paul@congdonfuzi.com.au