As a salaried employee, what are your options to reduce tax?

Discussion in 'Wealth Creation & Management' started by SpacePete, Jan 20, 2015.

  1. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    If you're a salaried employee in Australia and don't have any work deductions, what are your options for valid tax deductions? Negative gearing seems to be the big one, but is there anything else that could be considered?
     
  2. JulieW

    JulieW Well-Known Member Silver Stacker

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    Superannuation?
     
  3. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    That's doable up to the max contribution level for your age (I'm not in the privileged age bracket for super though). Note that the gov. is already spinning a story about people living to 150, so let's just accept that access to super will be a moving target for those of us born into later generations.
     
  4. smk762

    smk762 Active Member Silver Stacker

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    Work related education and training expenses.
     
  5. willrocks

    willrocks Well-Known Member Silver Stacker

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    Negative gearing?
     
  6. Agnostic

    Agnostic Active Member Silver Stacker

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    Margin lending - which can be combined with prepayment of interest in June, and also the receipt of franked dividends
    Income insurance
    Charity donations
    Agricultural business - but must be of sufficient scale/plan to be a business not hobby
    Rental property is probably the best for average people - there is a huge amount of scope there, particularly if you build a large portfolio.
     
  7. raven

    raven Well-Known Member Silver Stacker

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    Depends what you do. I claimed for a $512 watch !
     
  8. raven

    raven Well-Known Member Silver Stacker

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    Also, the tax dept. doesn't look at anything under 5,000 km for a log book, so if you drive to work, that's 3 grand right there !
     
  9. willrocks

    willrocks Well-Known Member Silver Stacker

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    Work less hours and start a hobby or business.
     
  10. Clawhammer

    Clawhammer Well-Known Member Silver Stacker

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    ^^^^
    This! (or ask the boss if they'd consider hiring you back as a consultant?)
    You can't really win as a salary slave. All you get is the promise of job security. however as we've seen in the past.... they'll fire you as easily as a consultant, only you wouldn't have pocketed the xtra cash.

    Been there...done that.
     
  11. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    Highly leveraged blue chip endowment warrants (prepaid interest) coupled with dividend skimming (fully franked) timed correctly over the EOFY.
    It is very lucrative if executed effectively. :cool:
     
  12. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    Never even heard of this one! Do you have any links to further info?
     
  13. ytrader

    ytrader Member

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    novated lease, if you are planning to buy a vehicle.
     
  14. Ouch

    Ouch Active Member

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    Two days ago, on 2015-01-18 at 11:54:29

    Today, 2015-01-20 at 16:18:39
    What a difference 2 days make :)
     
  15. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    Depends on the investment horizon and risk profile. Upon investigation it looks like his type of financial instrument is more for long-term investors so I'll avoid them.
     
  16. Golightly

    Golightly Well-Known Member Silver Stacker

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    Don't pay it at all, as per ATO website( before they re worded it)
    But still states the same thing.

    Tax is a voluntary obligation.

    You work with us we work with you blah blah blah you only agree to pay tax by signing the return.

    Look it up!!
     
  17. willrocks

    willrocks Well-Known Member Silver Stacker

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    It's voluntary right up till the point they put you in jail, or send the sheriff over to take everything you own.
     
  18. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    Not for long-term investors, but for very short- term tax benefits.
    Used to use endowment warrants, but they no longer exist, so I use instalment warrants just as effectively.
    An instalment warrant is basically a packaged margin loan on a single stock unit, and able to be bought and sold on market via the ASX.
    There are several components to the price of a warrant - the balance outstanding (principal), the interest component (pre paid) and a fee for the service of bundling and listing ( deductible).

    So, I'll give you a real-life example:
    I really like Westpac warrants because they are stable blue chip, and pay a good fully franked divvy just after EOFY. I use them every year to minimise my tax, but there are many others you can use throughout the year.

    Here goes:

    Take for example the high leverage Instalment warrant WBCJOO. (Bundled by Citibank).

    It has a final Instalment value of $27.46 due in May 2015.
    On 18th June 2014, WBC was trading at $34.10, and WBCJOO was trading at $7.50. Thus, $0.86 of the warrant price was the prepaid interest and fee component, and $6.64 was the intrinsic value.
    I buy 5000 WBCJOO @ $7.50 (total $35,000) Instantly, I have a $4,300 prepaid interest tax deduction.

    On 2nd July, they paid a fully franked dividend of $0.90. Total dividend = $4,500 ( equivalent to $5,850 unfranked)

    On 4th July, WBC share price had increased, so had WBCJOO, which were sold for @ $8.00 ($2,500 profit).

    So, in a 2 week period, I had out laid $35,000, which returned $8,350 in dividends and profits before tax (24% (or 624% annualised)), plus a $4,300 tax deduction to boot.

    Gotta love the game! ;)
     
  19. wrcmad

    wrcmad Well-Known Member Silver Stacker

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    Makes absolutely no difference to me.
    I trade what is happening..... Not what may happen.
     
  20. Ouch

    Ouch Active Member

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    I've used WBCJOO myself. Your example contains errors. WBC traded ex-div 14th May (Ref: Westpac 2014 Interim Dividend Details) so if you had bought WBCJOO on the 18th of June you wouldn't have gotten the dividends. Your calculation of the tax deduction is also wrong but that's a bit more complicated to explain so I won't. And looking at the past trade history of WBCJOO there were no trades on the 18th June so I assume your example was a hypothetical one.
     

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