Tax Strategies
In the world of finance and wealth management, tax planning is a fundamental pillar of success. As financial planners, we’re well aware that the right tax strategies can make a significant difference in your financial well-being. Whether you’re an individual, business, or investor, our expertise will empower you to navigate the complexities of the tax code and make informed decisions to secure your financial future. Join us on this journey to explore the myriad tax strategies that can make a profound impact on your financial planning endeavors.
Tax Brackets
- 0%: Taxable income up to $18,200 is tax-free for individuals.
- 19%: Income between $18,201 and $45,000 falls in this tax bracket.
- 32.5%: The next tier of income is taxed at this rate, ranging from $45,001 to $120,000.
- 37%: For higher income levels, the tax rate increases, applying to earnings between $120,001 and $180,000.
- 45%: The top tax bracket, applicable to income above $180,001.
These tax brackets are subject to change with updates to Australian tax laws and regulations, so it’s essential to keep up to date with the most recent information. They also do not include the medicare levy.
Super Contributions
- Concessional Contributions: Making pre-tax contributions to your superannuation account, known as concessional contributions, can reduce your taxable income.
- Salary Sacrifice: Consider setting up a salary sacrifice arrangement with your employer to divert a portion of your pre-tax salary into your superannuation.
- Tax Deductions: Self-employed individuals and those who are not eligible for salary sacrifice can claim a tax deduction for personal contributions made to their superannuation.
- Super Co-contributions: Low to middle-income earners may be eligible for government co-contributions by making personal after-tax contributions.
- Spouse Contributions: Contributing to your spouse’s super can also yield tax benefits if they are on a lower income.
- Contribution Caps: Be aware of the annual contribution caps to avoid penalties and maximize your tax savings effectively.
- Super Splitting: Consider splitting super contributions with your spouse to balance your super savings and potentially reduce tax in retirement.
Businesses Structures
- Sole trader: You pay taxes on your business income and any other earnings at the applicable marginal tax rate for individuals. Note that your tax rate could be up to 45% (plus Medicare levy) for top-income earners.
- Partnership: A partnership business structure is essentially a group of individuals. Each member of the partnership pays individual taxes based on their share of profits, alongside any other earnings in the financial year. The partnership itself doesn’t pay taxes.
- Company: The company tax rate is 30%, or 25% for base rate entities. Unlike other business structures, there’s no tax-free threshold for companies – every dollar earned is taxable.
- Trust: Each beneficiary must declare their share of trust income on their individual tax returns. The trustee can distribute trust income in the most tax-effective way, typically to beneficiaries with the lowest marginal tax rates. The trust itself doesn’t pay taxes.
