Tips on decreasing your assessable income

Your assessable income is different from your taxable income, and it is important when organising your tax return in 2014, that you understand the difference between the two. Assessable income refers to your combined income from all the sources where you earn money, over the financial year, so it could be in the form of your wage, any income from properties you rent out, dividends from shares that you hold, or assets that you have sold. Your taxable income, on the other hand, is the income that will determine which tax bracket you come under and what your actual taxation liability will be. In plain language, the more income that you earn then the more tax you will owe the Australian Taxation Office (ATO), conversely the less income then less tax is paid. So income tax professionals will often advise you on ways to reduce your assessable income so that you only pay the taxes you own and reduce your taxation liability.

There are one or two ways in which a tax accountant will advise you on how to decrease assessable income and they are as follows:
• Defer income until the next financial year
• Take advantage of tax office deductions

Deferring income

This can be undertaken by what is known as a “salary sacrifice” scheme and what you are actually doing is to contribute more money from your wage into a superannuation scheme. This works by the employee choosing to nominate a certain amount of their pre-tax salary and arranging for it to be paid directly into their superannuation scheme. Tax agents in the Gold Coast and Brisbane region as well as income tax accountants in Cairns, Ipswich, Townsville and Bundaberg, are well qualified to advise on the best superannuation schemes to consider. What in fact you are doing is to sacrifice some of your salary putting it directly into your retirement funds. This means that your gross salary minus the amount you have sacrificed becomes, for taxation purposes, your new assessable income. Therefore you have reduced your assessable income but at the same time reducing the tax you will be required to pay and increased your personal wealth at one and the same time.

The other way in which you could defer some of your income is by delaying collecting of invoices for example. This means deferring income until after June 30th which you could do by also reviewing term deposit maturity dates. If you do get some of your income via property rentals then consider carrying out minor maintenance and repairs before the 30th June deadline or you can consider prepaying 12 months of expenses that are tax deductible so that you bring the deduction forward into the current tax year.

Tax deductions

This is where your income tax accountant or agent can really help and keep you up to speed with the number of deductions that the ATO make available each tax year. This will include items such as work related expenses or anything that will contribute to reducing the amount of your assessable income.

However, it is really important to note that if you are considering deferring income or other ways in which to reduce your assessable income, then you have to do this before the start of the new tax year, which is why it is important to get the best advice from taxation experts such as income tax accountants in and around the Gold Coast and Brisbane area.

The Income Tax Professionals have been providing taxation services in Australia for over 35 years and delivers personal attentive service if you need to speak to an expert about your taxation issues.