Reducing tax and achieving financial freedom are common goals for many employees whilst succeeding in their careers. While it’s crucial to comply with tax laws, there are legal strategies to optimize your financial situation. Here are five things an employee can do to reduce PAYG tax and work towards financial freedom:
Maximize Salary Packaging:
Take advantage of salary packaging options provided by your employer. This may include allocating a portion of your pre-tax salary to benefits such as superannuation, health insurance, or a novated lease for a car. By doing so, you can potentially reduce your taxable income, leading to lower overall tax liability.
Contribute to Retirement Savings:
Making voluntary contributions to your superannuation fund is not only a smart move for your future retirement but can also provide immediate tax benefits. Contributions made voluntarily are often tax-deductible, reducing your taxable income. Be mindful of contribution limits and seek financial advice to determine the optimal amount to contribute.
Claim Eligible Deductions:
Keep meticulous records of work-related expenses that are eligible for tax deductions. This could include expenses related to professional development, work-related travel, or necessary tools and equipment. By claiming legitimate deductions, you can reduce your taxable income and potentially increase your tax refund.
Explore Government Tax Offsets and Credits:
Stay informed about PAYG tax offsets and credits for which you may be eligible. These can include the Low and Middle Income Tax Offset (LMITO), education-related credits, or other targeted incentives. Research and ensure you are taking advantage of any tax breaks that apply to your personal situation.
Invest Wisely:
Explore investment opportunities that offer tax advantages. Investing in tax-effective options such as shares held for the long term (which may attract capital gains tax discounts) or contributing to tax-advantaged accounts like the First Home Super Saver Scheme can help you build wealth while minimizing your tax liability.
Additionally, whilst achieving your career through employment staying informed about changes in PAYG tax regulations and regularly reviewing your financial strategy can help you adapt and make the most of available opportunities for reducing tax and achieving financial freedom.