Being Tax-Savvy

Part 3 of CPA Australia's 30 Ways to Build Your Wealth series highlights ways to minimise your tax and maximise your after-tax income.

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Summary

1. Salary sacrifice

Salary sacrificing provides an opportunity for employees to pay for expenses from pre-tax dollars. For most employees, the opportunities are quite limited. However for some (such as nurses) there can be wider scope to salary sacrifice.

2. Getting rid of non tax-deductible debt and clearing debt

Debt is a necessary part of life - and not all debt is necessarily bad, particularly if the debt is used to buy an asset that appreciates in value.

3. Buy insurance via superannuation

Provided you are able to meet any estate planning needs, there can be real savings to buying insurance through your superannuation as the premiums are paid from your contributions, which have normally been taxed at a lower rate than if they had been paid from salary and wages.

4. Superannuation splitting

One of the tax breaks offered to superannuation is that you normally get a portion of your contributions back tax free when you retire. New rules from 2006 double the potential benefi ts to families. The new rules mean that contributions can be directed to ensure both spouses are able to take advantage of this tax-free threshold for lump sum payments.

5. Contribute to super

Contributing to super is one of the most tax-effective ways to save for your future.

6. Using the correct tax and investment structure

Ensuring you have the correct tax and investment structures can make a difference to your bottom line, as long as your choice of structure is made for the right reasons.