Tax minimisation strategies are ways that individuals and businesses may consider to minimise their tax legally. It is important to note that while tax minimisation strategies are legal, they are different to tax evasion or illegal tax avoidance.
Some common tax minimisation strategies that individuals and businesses could consider are as follows:
- Maximise Deductions and Credits: Take advantage of all available deductions and tax credits. This includes deductions for charitable contributions, mortgage interest, medical expenses, and education expenses.
- Contribute to superannuation Accounts: Contributing to superannuation accounts can reduce taxable income and help save for the future.
- Tax-Loss Harvesting: Offset capital gains by selling investments that have lost value. These losses can be used to reduce overall capital gains tax liability.
- Income Shifting: For businesses, consider income shifting strategies to move income from higher tax brackets to lower tax brackets. This may involve employing family members or restructuring the business.
- Forming a Trust or Family Partnership: Trusts and family partnerships can offer tax benefits, especially for estate planning and transferring assets to the next generation.
- Charitable Giving: Donating to registered charities can result in deductions that lower taxable income.
- Tax Credits and Incentives: Research tax credits and incentives that may be available for your specific circumstances, such as energy-efficient upgrades for your home or business.
- Tax Deferral: For businesses, consider deferring income or profits to future years to delay tax liabilities.
It’s important to keep in mind that tax laws can be complex and subject to change, so seeking advice from a qualified tax professional is essential to ensure compliance and optimise your tax strategy legally.