Five last-minute hacks to help reduce your tax bill

Five weeks until the end of the financial year means it’s action stations for my tax minimisation strategy.

This year, I am using a five-pronged approach, and you can too. There is also a bonus opportunity if you are in a couple, but I’ll explain that move at the end.

Five weeks until the end of the financial year means it’s action stations if you want to make any moves to minimise your tax.Credit: Louie Douvis

Prong 1: Prepay my income protection

One of the beauties of income protection insurance is that – though expensive – it’s tax-deductible. What’s more, you can usually prepay it a year (or maybe even more) ahead. So I’ll be prepaying mine.

At an annual cost of about $3000, that’s a decent amount to lop straight off my assessable income. Remember, this saves you the tax on that amount at your marginal rate of currently 16 per cent, 30 per cent, 37 per cent or 45 per cent, not including the 2 per cent Medicare Levy.

And while we’re on the pre-pay topic, you can get ahead on investment loans by up to one year and claim the interest deduction in the 2024-25 tax year, in advance.

Prong 2: Bring forward deductible spending

In each industry, there are employee and business expenses you can claim – the idea, of course, being that these facilitate your salary.

The ATO has a comprehensive list of what can, again, come off the top of your assessable income. There is some weird and wonderful allowable stuff in some industries – for me, it’s mainly stationery and filming/recording expenses, and professional subscriptions and memberships.

But think also about whether it’s worth booking – and pre-paying – any deductible training. Note, too, that with working from home expenses, you can use an “actual costs” method of claiming your expenses or a “fixed rate” method with 70c paid per work hour.

Prong 3: Delay income

Where you can, and given the tax rate will slightly fall in the 2025-26 financial year, it’s effective this year to push income into next year. How? If you are in a position to do so, delay invoicing and see if any overtime or bonuses can be paid after June 30.

Prong 4: Get donating

You get a dollar-for-dollar deduction for money you give to a registered charity, so it’s a perfect time to think about people who might be doing it tougher than you… and helping them out at maybe almost (for highest rate taxpayers) half the cost.

Just be sure you get a receipt and remember that you can’t be in line for any kind of personal benefit, so raffles and art unions don’t count.

Prong 5: Shovel money into super

No, you can’t get at your super usually until you are 60, but if you pay in money before the end of the tax year – do it soon as you will need to allow processing time – there’s a trick to turn this into a tax deduction.

What you do is fill out an “intent to claim” form on your super fund’s website. This effectively switches it from an after-tax to a before-tax contribution, and makes it what’s officially called a personal deductible contribution.

Now this tax technique doesn’t save you your full marginal rate, but it does save you that rate minus the 15 per cent super contributions tax, which is still not bad for higher rate taxpayers.

Just watch that you haven’t exceeded – or won’t exceed – the concessional or before-tax contribution limit of $30,000 this tax year, or you will be slugged with extra tax. Be aware the concessional limit includes any employer superannuation guarantee and salary sacrifice contributions, too.

With one person in a couple often with a smaller super balance, there is a tremendous, tax-effective equalisation strategy.

If you had a balance of less than $500,000 on June 30 last financial year, you can also mop up to five years of unused contributions limits under carry-forward provisions. This ability adds to a total of $137,500 this tax year… but don’t forget it includes those employer and salary sacrifice contributions.

This is particularly effective if you might have ready cash to contribute, say because of a sale of shares or an investment property. It can offset the (possibly discounted) capital gain from that sale (and consider if it’s worth also selling any loss-making investments).

Couples bonus strategy

With one person in a couple often with a smaller super balance, and also with higher tax now planned on larger balances, there is a tremendous, tax-effective equalisation strategy.

Provided one of you earns under $40,000 a year, if the other pays in an after-tax $3000 to the lower earner’s fund, the payer will receive an up-to $540 tax offset.

A tax offset is also far more powerful than the deductions we have been talking about, on which you only save your marginal rate. A tax offset is a straight-up discount on your tax bill – you will pay $540 less in tax for your trouble.

This is a great family wealth-building opportunity that – if you’re eligible – you should be availing yourself of year after tax year.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter, and Instagram.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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