You’re guaranteed two things in life – death, and taxes. While taking care of your physical and mental health can lead to a longer, healthier life, financial planning, and strategising can reduce your tax liabilities. Everyone wants to pay less come tax time. For those who’re looking into debt consolidation and credit repair, learning how to reduce your taxable income can keep more money in your pocket and help you pay off your debts faster. Our list of 15 easy ways to reduce your taxable income in Australia can help.

How to Reduce Taxable Income

What are the easiest ways to pay less tax this year in Australia? We’ve rounded up 15 of the easiest ways to pay less tax that can help you reach your savings and debt reduction goals faster.

 

1. Use Salary Sacrificing

For those trying to learn how to save tax in Australia, salary sacrificing is one way to do it. This is also called “salary packaging,” and it works a few different ways. With salary sacrificing, a taxpayer would put some of their pre-tax income toward a benefit before they are taxed. Some of the most common salary sacrifice benefits are motor vehicles and superannuation.

So, an employee would forgo part of their pre-tax paycheck before they get it. For example, they could use salary sacrificing to pay for a new car, computer, insurance, rent payments, mortgage payments, and other benefits. These benefits are also referred to as “fringe benefits,” and they can save Australians thousands of dollars in taxes every year, with a few exceptions.

For one thing, there is a limit on what can be salary sacrificed, also called salary packaged. Also, Fringe Benefits Tax, or FBT, can impact the types of benefits your employer offers. For example, employers will offer to salary package a car as a novated lease. This is an agreement between your employer, you, and a financer, and is one way to get access to a new car while reducing your taxable income. If you want to increase your refund this year, you could also consider salary packaging your superannuation too.

What are the specific eligibility criteria and limits for salary sacrificing and fringe benefits in Australia?

To enter into a valid and effective salary sacrifice arrangement in Australia, you must meet the following conditions:

• The arrangement must be made before the employee earns the income or performs the work. It cannot be backdated or applied retroactively.
• There must be a written agreement between the employer and employee (sometimes involving a third-party provider), clearly stating the salary sacrifice terms and benefits involved.
• Employees must not be able to access the sacrificed portion of their salary as cash. Otherwise, it will be taxed as regular income.
• Not all employers offer salary packaging. It depends on employer policy and administrative capability. Public sector workers (e.g., in the Victorian Public Service) may have specific schemes and internal rules.
• Salary packaging benefits middle- to high-income earners the most who can reduce taxable income while gaining work-related or exempt benefits.
• For lower-income earners, the tax savings may be minimal, and care must be taken that reportable benefits do not reduce access to other income-tested benefits.

2. Keep Accurate Tax and Financial Records

The ATO is far more likely to ask a lot of questions about your tax deductions than they were a few years ago. If they ask about your deductions, you’ll need to show them receipts for tax deduction claims. Unfortunately, not having a sound filing system can cause a lot of headaches for your tax time. So many Australians miss deductions they can legally claim because of a lack of sound record keeping. If you make this mistake, the ATO will keep your hard-earned money that should have stayed in your pocket.

How should I organise my financial records in Australia to ensure I can claim all possible deductions effectively?

Many people wonder if they have to keep track of every single deduction. But the best thing to do when it comes to claiming deductions and satisfying the ATO is to keep track of the deduction receipts. This will make it easier for you to remember what you can claim. Record-keeping doesn’t have to be complicated.

Here are more strategies to make record-keeping easier:

• Begin gathering and organising your tax documents well before the filing deadline to avoid last-minute stress.
• To ensure nothing is overlooked, create a comprehensive list of necessary documents and receipts for deductions.
• Designate a specific space, whether physical or digital, for storing tax-related documents to maintain order and easy access.
• Leverage apps and software to scan, store, and categorise receipts and expenses, facilitating efficient record-keeping.
• Organise your expenses into categories like business, medical, and charitable donations to streamline the deduction process.
• Maintain a calendar of tax-related deadlines to ensure timely submissions and avoid penalties.
• Examine last year’s return to identify recurring deductions and ensure consistency in your filings.
• If overwhelmed, consult a tax professional to assist in organising documents and maximising deductions.

Dedicate ten minutes of your time each week to download statements and update your logbooks. Make sure you keep all your receipts in a conveniently accessed, organised, and easy-to-use file folder or filing cabinet. Keeping accurate tax records will save you a lot of time searching for everything at the end of the fiscal year, and best of all, you’ll be able to claim your deductions and ultimately pay less in taxes.

 

3. Claim ALL Deductions

If you spend any money on anything related to earning income, you’ll want to claim it. Be sure you declare all deductions possible to pay less tax in Australia. Even things that may seem small and insignificant can add up to huge savings at the end of the financial year. For example, if you purchased something that is used for work, but you also sometimes use it during your time off the clock, you can still claim the money you spent on it as a work-related tax deduction.

What are some common, lesser-known expenses that can be claimed as deductions in Australia, and how can I determine their eligibility?

The ATO has outlined several expenses you can claim as tax deductions and the commonly overlooked ones are:

1. Work-Related Bags and Cases. If you purchase a bag or case specifically to carry work-related items such as laptops, tablets, or documents, you may be eligible to claim a deduction. The bag must be used primarily for work purposes, and if it’s used for both work and personal reasons, you should apportion the deduction accordingly.
2. Self-Education Expenses. Courses or training that directly relate to your current employment can be deductible. This includes tuition fees, textbooks, stationery, and travel expenses to attend the course. However, if the education is intended to help you get a new job or is only generally related to your current job, it may not be deductible.
3. Working from Home Expenses. If you work from home, you may be able to claim deductions for additional running expenses such as electricity, internet, and phone usage. The ATO provides methods to calculate these expenses, and it’s important to maintain accurate records of your working hours and expenses incurred.
4. Investment-Related Expenses. Costs incurred in earning investment income, such as account-keeping fees for investment accounts or expenses related to attending investment seminars, can be deductible. It’s essential that these expenses are directly related to earning assessable investment income.

If you’re unsure whether or not you can claim a specific item as a work-related tax deduction, keep the receipt of purchase and ask your tax agent when you file. It’s always better to hang on to receipts and not be able to claim the item than to toss the receipt and miss out on tax savings.

 

4. Feeling Charitable? How to Pay Less Tax with Donations

Every donation you make to a registered charity greater than two dollars is considered tax-deductible. After donating, the organisation should send you a receipt. Make sure to file that away for tax season. Once tax time rolls around, add up your charitable receipts and enter that into the “charity donations” section in your tax return. But remember that donations do not come back via a tax refund. Instead, the amount of the monetary gift is reduced from your total taxable income, meaning you’ll get back a percentage of the donation based on your tax rate. 

Which charities or types of donations qualify for tax deductions in Australia, and is there a limit to how much can be claimed?

To claim a deduction, the donation must be made to a Deductible Gift Recipient (DGR), which includes many charities, environmental groups, cultural organisations, school building funds, and overseas aid funds. You can check an organisation’s DGR status using the ABN Lookup.

Here are some key rules and limits to keep in mind:

• Donations must be $2 or more to qualify.
• If you receive a material benefit (like a raffle ticket or merchandise), the donation isn’t deductible. Tokens like lapel pins or wristbands are okay.
• There’s no cap on how much you can claim, but the deduction can’t create or increase a tax loss.
• If your donation exceeds your taxable income, you can choose to spread the deduction across up to five years.
• You can claim up to $1,500 per year for donations to registered political parties, and another $1,500 for independent candidates or members.

Always keep your receipts or bank statements as proof—ATO may ask for them if you’re audited.

 

5. Minimise your Taxes with a Mortgage Offset Account

If you have a home loan, a mortgage offset account lets you offset your non-deductible interest on the home loan with interest on the standard, taxable earnings of money in a deposit. With this arrangement, taxpayers can create a savings account with their lender. But instead of paying interest on the entire amount of the home loan, taxpayers are charged interest on the loan, minus the money in the savings account.

 

6. Add to Your Super (or Your Spouse’s) to Save Tax in Australia

Concessional super contributions are taxed at a rate of 15 percent once they enter a super fund. This is different than if they were taxed at a marginal rate, which is sometimes as high as 49 percent. What are the different types of concessional contributions you can make? You can make the following concessional contributions to lower your taxes:

•     Salary sacrificing
•     Personal deductible contributions

There is no income tax limit on salary sacrifices. Self-employed taxpayers or unsupported taxpayers can make contributions to their supers and also claim a full tax deduction.

How do concessional and non-concessional super contributions differ in terms of tax benefits in Australia?

Concessional contributions are made from your before-tax income, which means you pay only 15% tax on them when they go into your super. That’s a lot less than most people’s income tax rate, which can be as high as 47%. So, using things like salary sacrifice or claiming a tax deduction on personal contributions can reduce your taxable income and help you save on tax now, while also growing your retirement savings. 

Non-concessional contributions are made from your after-tax income, which means you’ve already paid income tax on the money. The upside is that no further tax is taken out when you put this money into your super, and any investment earnings inside your super are taxed at a lower rate than outside super (usually just 15%).

 

7. Get Private Health Insurance

You should only do this if it makes sense. If you don’t carry private hospital insurance, but you’re single and make more than 90,000 dollars a year, or you’re a family and make more than 180,000 dollars per year, you will pay a minimum one percent Medicare Levy Surcharge. The Medicare Levy Surcharge is also collected on top of a mandatory two percent Medicare Levy that most taxpayers have to pay anyway.

Basic, private healthcare plans can cost less than the one percent of Levy Surcharge on your gross income, which would be less than the Medicare Levy you’d pay without insurance. For some people, private healthcare might be worth it to lower your taxes. Depending on your needs and medical history, it might also be worth it for the often shorter wait times you’ll get with private healthcare.

How do I calculate whether getting private health insurance would result in significant tax savings?

If your income is above the MLS threshold and you don’t have hospital cover, you’re likely paying extra tax. If the insurance costs less than the surcharge you’d pay, you’ll come out ahead financially with private health insurance.

To make it easier, you can also use the ATO’s private health insurance rebate calculator or consult with a tax agent.

 

8. Minimise Capital Gains and Minimise Taxes

Any significant assets sold in a given financial year, such as shares, or property, are subject to a capital gains tax. If the investment has been held for at least one year, you’ll be charged a 50 percent capital gains tax on top of your marginal tax rate. Capital gains taxes have to be paid in the year they are realised. However, losses can be carried forward, but not back. Taxes payable within the financial year can also be decreased if you prepay deductible interest.

On investments, you can prepay expenses up to twelve months in advance. So, interest on investment loans and management fees can be claimed this financial year. If you have a substantial tax liability this fiscal year from the sale of an asset, prepaying can help you save money on taxes.

When it comes to taxes and property, another tax exemption from Capital Gains Tax is if your property is your principal place of residence or PPOR. You can claim the principal residence exemption from Capital Gains Tax for your house. To get it, you’ll need to have lived in the house, or the property must have a dwelling on it that you live in. Learn more about how to reduce Capital Gains Tax for property used for business and investment purposes.

Other strategies to minimise capital gains tax when selling significant assets:

• Use the 6-year rule. If you move out and rent your main residence, you can still treat it as your main residence for CGT purposes for up to six years, potentially avoiding tax when you sell.
• Use the six-month rule (for overlapping residences). If you buy a new home before selling your old one, you may still qualify for the main residence exemption on both for up to six months if you meet the conditions.
• Time the sale strategically. Consider deferring a sale until a financial year when your income is lower, which can reduce the CGT payable since it’s taxed at your marginal rate.
• Contribute gains into superannuation In some cases, you can contribute the proceeds from a sale into super and benefit from lower super tax rates instead of paying full CGT.

 

9. Prepay Expenses

If you pay for some income-related expenses in advance, it can reduce your taxable income by moving your deductions forward to the next financial year. This will give you a higher tax refund. All prepaid expenses need to be less than a thousand dollars or meet the 12-month rule for prepaid expenses. The 12-month rule lets you claim a deduction as a prepaid expense as long as the service doesn’t exceed twelve months and stops in the next financial year.

 

10. Delay Income

Learn how to reduce tax with this neat little trick. You can defer receiving income until June 30, which will help you avoid paying taxes in the current financial year.

 

11. Don’t Include Non-Taxable Income

The ATO considers some income that is exempt or non-taxable, and you don’t want to include it on your tax return. But, certain exempt income could be taken into account when tax losses of earlier income years are calculated. You can deduct some income and the adjusted taxable income of any dependents you have. Exempt or non-taxable income includes the following:

•     Some Australian Government pensions, including disability support pensions from Centrelink to those who are younger than pension age
•     Some Australian Government payments and allowances, e.g., the childcare subsidy and carer allowance
•     Overseas pay and allowances for Federal Police personnel and Australian Defence Force
•     Australian Government education payments, including allowances for students younger than sixteen
•     Specific scholarships, awards, and grants
•     Lump-sum payments from the surrender of an insurance policy, mortgage protection, or as payment for a terminal illness or work-related injury

 

12. Make Use of Offsets

Tax offsets, also known as tax rebates, can reduce your taxable income if you meet certain eligibility requirements. While in theory, these offsets could reduce your tax bill to zero, they won’t get you a tax refund. Income tests are some of the most common tax offsets.

 

13. Meet ATO Deadlines

If you register with a tax agent, tax returns can be lodges as late as May of the next financial year as long as you aren’t in dispute with the Tax Office. But for everyone else, all returns must be lodged by October 31. Meeting all ATO deadlines can help you avoid conflicts and penalties. Self-lodgers with simple finances and circumstances typically submit their taxes online with the Tax Office. The account will be populated with your previous year’s return and any information provided from your bank, workplace, government agencies, etc. The Tax Office collects this information until the beginning of August, so you’ll want to wait until after that to lodge online.

How can I ensure that I’m meeting all ATO guidelines and deadlines to avoid penalties and maximise tax benefits?

To make sure you’re meeting all ATO guidelines and deadlines, avoiding penalties, and getting the most from your tax return, you’ll need to stay organised and proactive throughout the year, not just at tax time.

Here are some handy tips from us:

• Keep on top of deadlines. Know the key dates, such as the deadline to lodge your returns if doing your taxes yourself, as a business owner or a sole trader.

• Keep accurate records year-round. Use the ATO’s myDeductions app or your preferred accounting software, save all receipts, invoices, and donation confirmations in one place, and maintain logbooks for car expenses or home office use, updated consistently.

• Know what you can and can’t claim. (See Tip #3 above).

• • Check your MyGov account for income statements from employers, notices of assessment, super balances and contribution caps, and any ATO messages or reminders about lodgement and payments.

• Review and plan before EOFY. Don’t leave it until June 30. Tax planning throughout the year can help you legally reduce your taxable income.

 

14. Follow the Rules

Paying taxes can indeed be a painful experience, but fudging the numbers and breaking the rules will set you up for trouble down the road. Taxpayers who have tried to make deductions that weren’t true have gotten into hot water with the ATO. The ATO will investigate large, and sometimes small, tax deduction claims that look suspicious.

 

15. Use a Tax Agent

A professional tax agent can save you a lot of time when it comes to lodging your taxes. They also have inside knowledge and industry expertise on taxes and refunds. By hiring a tax agent to help you with your taxes, you’ll get the largest tax refund possible without running afoul of the ATO.

What advantages do professional tax agents offer, and how can they help me in reducing my taxable income without making mistakes?

Besides what’s above, professional tax agents also know exactly what you can (and can’t) claim. They are trained to stay across ATO rules, which means they’ll:

• Identify all eligible deductions—even the ones you might miss (like depreciation, travel, or specific industry-related claims).
• Ensure claims meet ATO standards so you’re not risking audits or penalties.

They also reduce the chance of errors or penalties. ATO penalties often result from accidental errors or incorrect claims. Tax agents:

• Double-check all figures and categories
• Ensure your return is complete and accurate
• Help you avoid red flags that may trigger an ATO audit

Tax agents also handle more complex situations with ease. If you have:

• Investment properties
• Capital gains
• Foreign income
• Business income or sole trader activity

…a tax agent can make sure everything is lodged correctly and that you don’t overpay tax.

 

If you’re learning more about credit repair and trying to reduce debt, lowering your taxable income and getting a refund come tax time can keep more money in your account. Instead of giving that money to the taxman because you didn’t know what deductions you could take, you can use that refund to pay off debts and rebuild your credit faster.

You’re guaranteed two things in life – death, and taxes. While taking care of your physical and mental health can lead to a longer, healthier life, financial planning, and strategising can reduce your tax liabilities. Everyone wants to pay less come tax time. For those who’re looking into debt consolidation and credit repair, learning how to reduce your taxable income can keep more money in your pocket and help you pay off your debts faster. Our list of 15 easy ways to reduce your taxable income in Australia can help.