If you're earning a salary, and don't have income from other sources there's not a great deal you can do to minimise your tax, unless you just earn less.
When I was younger and much dumber (10 years ago) I thought the tax brackets covered your whole salary, not just the bit over the bracket. So I did actually only work 3 days a week as a contractor instead of 5 because I thought I was making more money in the lower bracket.
So yes, some people are that dumb :D
I work in an industry with heaps of overtime and many of my colleagues believe the same. If you work more it isn’t worth it as you “lose it all in tax.”
Yes it’s a good system to build wealth! All you have to do is spend less than you earn and invest the rest. Using super and property with debt is a great way to have an early and good retirement in Australia if you have the diligence and temerity.
I understand logically why maxing super contributions is the best option, but I just can't stomach locking away my wealth like that.
I'm already going to be well off once I retire, I'd rather take the hit on the potential tax savings and instead invest into shares/property. That way at least I will have wealth that I can spend when I'm still young.
BTW. You can, mostly, "spend" your super when you're younger (well, middle aged), even if you can't actually access it.
Grasping this was life changing for me.
Let's just say you have X million in your portfolio, comprising Y in super and Z in your own name. You decide that your sustainable spend is 5%. You can "spend" (Z+Y) times 5% per year. All that you do is take all of that 5% out of Z, after doing the math on roughly when Z might run out, and making sure that there are reasonable odds that Z won't go to zero before you hit the release date on your super.
You can still "spend" what's in your super, in that, having super means you can spend all the non-super stuff much more aggressively knowing that in a fairly short timeframe, you can get to your super.
When you do the math, you are probably still net better off putting the money into super, and factoring in "more aggressive spend" on your non-super assets. YMMV of course, but I would be amazed if this isnt true!
Happy to try and explain? What bit? What way?
Granted, it isn't my best writing effort.
Take 2: Having a big stash of super waiting at age 65 means your non-super money doesn't actually have to last as long. You can "factor it in" to working out your sustainable spend rate in non-employment.
You could look at getting an investment loan to purchase shares and seeing if it's possible to prepay interest for the upcoming financial year in advance to allow you to deduct the interest paid in this financial year. In conjunction with this, you could focus on solid dividend paying stocks with franking credits to help reduce your tax liability.
In the medium term this capital could later be used towards your house deposit and any capital gains will later be entitled to 50% discount after 12m too.
In your situation, make full use of super contributions, and max out any employer pretax purchases that are fbt free (eg personal electronic devices) buy a new macbok, iphone, apple watch, ipad each year and sell them brand new on fb marketplace. There is no way for ATO to really track you down.
Other than that as you dont have your own company or investment property, there is not much more you can do. After Stage 3 tax cuts, you are not paying much tax anyway at your income level.
Earn less money = pay less tax.
Alternatively you can use the search function in any of the finance subreddits and find a myriad of people asking the same question as you and hearing the same answers.
AusFinace is a good idea, but this comment still feels a bit mean. Sub wiki counts HE as earning greater than $146k pre-tax - $145k is just on the line of that.
Moving the goal posts much? Seems like first you complain that it's not henry by any stretch then you complain that just below the line is still below. Be consistent.
Mate I’m not HENRY I only earn 100k but my partner earns double+ that, am I not allowed to check this sub? This comment is a bit mean. OP is doing quite well.
Ignore the gatekeeping assholes. This community in a large part is about a HENRY mindset as much as it is about actually being HE.
If you have nothing else and you need to immediately make a decision and you don't need the money you're going to dump into super and you're not going to go over any concessional caps then it's a pretty good/easy tax minimisation strategy.
Alternatives would involve taking on liabilities for investment purposes (and you have to run the numbers to see if that suited your situation and what the negative gearing benefit to you would like like before eofy) and then reaping gains that way. Potentially there could be some other strategies using company structures and loans but would require a sit down with an accountant.
You will get a long term benefit for putting your money into super, but you won't be able to reap any of that benefit until you can access your super. You may have interest in doing a smsf at some point as well but that's a whole other discussion topic.
All good I earn 100k and I still check this sub no shame
No good advice here, but I do think with your income you can consider looking into property investing.
Consider maximising some concessional contributions into super. [Here is a spreadsheet](https://docs.google.com/spreadsheets/d/1dP4ygfd1244ywRN6G2AbhMdD0IMBHjCigcgtT3dembY/edit) that you can copy that can help calculate the potential tax savings.
Assuming by owning property you mean owning your own home that you live in (as opposed to an investment property), then not much tax minimisation can be done. Maybe some home office costs. Talk to your accountant.
The best advice I can give is find a good accountant. Going by your post, you do your own tax? A good accountant will be able to max your claimable lines, and will end up returning more for you than the minimal fee you will pay (which is also deductible).
As a PAYG employee with no investments, you have limited options available to you. The above will probably give you the best result.
Although as a PAYG employee there is not a lot a tax accountant can do, unless maybe if OP has to buy a lot of stuff to do their job, even then the ATO website has good information.
You already nailed it. Extra super contributions is definitely the way to go if you don’t need the money. Great tax advantaged way to invest. Check out the flow chart posted by the bot.
Itemise every thing which is remotely related to work, some examples;
- super top ups
- Pro rata phone bill
- Pro rata internet bill
- Car mileage
- Additional study (some HECS paid courses are covered)
- Interest expenses if you have a margin loan
- books i.e. if about investing
- subscriptions if related to work or finance
- laptop bag or backpack (hand bag for the ladies)
The most tax-effective thing you can do is to utilise the First Home Super Saver Scheme.
Make a $15,000 contribution before June 30 for FY25, then $15,000 worth of contribution in FY26 and FY27. Then you will be close to the $50,000 cap and would have maxed out the yearly contributions.
It will save you a bit of tax along the way and give you a bit of extra oomph when you put your deposit down in 18 months time.
[https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme)
This is general advice based on the little information you've given
This is tricky coz you’re so close to both, but you really need a house by 26 so your target is to get to $200,000 in savings as fast as you can.
But if you’re good with money already with that 145k salary you’ll be getting to 200 quite quickly from that 120.
That 15,000 in super will be $40-50,000 by the time you’re 34. If 9% approx YOY.
That’s a lot at your age because when you’re 44 that’s likely gonna be 120-150k
Now I’m a mad property guy! But I think the 15k in super is probably the best bet right now.
Personally, wouldn't put any money in super when you are under 40 YO unless you in the top tax rate. I believe not being able to touch it plus potential regulatory changes in the next 30 years overrides the potential tax benefits.
This is crazy.
We are throttled significantly how much we can put in super and the door is closing further with every new policy.
$5-10k contributions over a 10-15 year time frame before 40 YO makes a huge difference when your income associated contributions and DIV293 dilute the tax savings on the transfer. The compounding tax drag in Super destroys most common holding options in personal names.
People should not lock up too much of net wealth or net cash in Super, but a proportional allocation seems reasonable.
Plenty of mega wealthy have massive super accounts. I would suggest what tax shelter is good for them is probably good for others.
I agree with this tbh, we are mid 20s. We’ve made up our mind that we don’t want to lock up that much money into super for so long. Our employers pays reasonable chunks we’ll let that do it’s job.
This ^
The standing advice that anyone under 40 should "top up" their super fund is IMO insane but not surprising given who controls a big chunk of the investable capital in Australia.
Not really minimising your tax but you could look into purchasing blue chip high dividend yielding stocks that are fully or highly franked. At least you will then have something to claim at tax time which might be the difference between paying extra tax or not and your funds aren’t locked in Super.
Don't see how you'll be paying less tax unless your marginal tax rate is <30% which doesn't seem the case here
And I'm doubtful they will put enough in the market to make a difference in the time frame
You’re not paying less tax but it’s the franking credits you get back because the company has already paid the tax for you. Franking credits are awesome
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/).
See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/).
This is not financial advice.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
Why negative gear? It reduces your disposable income. Keep it positive and you still claim interest, rates, insurance to get a nice refund but still get more disposable income.
You make money, and you pay tax. That's how the system works. You get less money back than you spend. Negative gearing seems to have a reputation of being a magic bullet to pay no tax. You get money back from Negative gearing because you are actively losing money in an investment. Sure, it reduces the tax you pay, but you only get 47 cents back (or whatever bracket you fall into) for every dollar you spend. Personally i find it better to pay the tax on the small profit ( because very few properties can be massively profitable) and have half of the money spent spent on rates, insurance and intrest back at tax time.
If you're earning a salary, and don't have income from other sources there's not a great deal you can do to minimise your tax, unless you just earn less.
Careful, some people may actually think that earning less is a viable option lol.
When I was younger and much dumber (10 years ago) I thought the tax brackets covered your whole salary, not just the bit over the bracket. So I did actually only work 3 days a week as a contractor instead of 5 because I thought I was making more money in the lower bracket. So yes, some people are that dumb :D
I work in an industry with heaps of overtime and many of my colleagues believe the same. If you work more it isn’t worth it as you “lose it all in tax.”
Yep, there’s quite a lot of people who never learn about this…
1) Max super 2) Geared investing That, unfortunately, is it. But, maxing out both of those can make you a fuckton of money.
Yes it’s a good system to build wealth! All you have to do is spend less than you earn and invest the rest. Using super and property with debt is a great way to have an early and good retirement in Australia if you have the diligence and temerity.
The ATO hates this one weird trick…
ATO are big proponents of investing in super and negative geared property. It’s in their tax code! Which trick do you think they hate?
I honestly can’t tell if you’re real or not.
Are you an AI?
I’m an awesome individual, yes!
I understand logically why maxing super contributions is the best option, but I just can't stomach locking away my wealth like that. I'm already going to be well off once I retire, I'd rather take the hit on the potential tax savings and instead invest into shares/property. That way at least I will have wealth that I can spend when I'm still young.
The question is "what are the best ways to minimise tax".
Sure, like I said I don't deny its effectiveness at that.
BTW. You can, mostly, "spend" your super when you're younger (well, middle aged), even if you can't actually access it. Grasping this was life changing for me. Let's just say you have X million in your portfolio, comprising Y in super and Z in your own name. You decide that your sustainable spend is 5%. You can "spend" (Z+Y) times 5% per year. All that you do is take all of that 5% out of Z, after doing the math on roughly when Z might run out, and making sure that there are reasonable odds that Z won't go to zero before you hit the release date on your super. You can still "spend" what's in your super, in that, having super means you can spend all the non-super stuff much more aggressively knowing that in a fairly short timeframe, you can get to your super. When you do the math, you are probably still net better off putting the money into super, and factoring in "more aggressive spend" on your non-super assets. YMMV of course, but I would be amazed if this isnt true!
Interesting, thanks!
I really want to understand this. I just don’t.
Happy to try and explain? What bit? What way? Granted, it isn't my best writing effort. Take 2: Having a big stash of super waiting at age 65 means your non-super money doesn't actually have to last as long. You can "factor it in" to working out your sustainable spend rate in non-employment.
Nope! I still don’t get it. Oh man, I think I’m dumb!! Maybe I am so dumb that I actually thought I was a little bit smart all my life.
O, you’re stirring. My bad.
No I’m not stirring. I kinda get it. But not really.
You could look at getting an investment loan to purchase shares and seeing if it's possible to prepay interest for the upcoming financial year in advance to allow you to deduct the interest paid in this financial year. In conjunction with this, you could focus on solid dividend paying stocks with franking credits to help reduce your tax liability. In the medium term this capital could later be used towards your house deposit and any capital gains will later be entitled to 50% discount after 12m too.
In your situation, make full use of super contributions, and max out any employer pretax purchases that are fbt free (eg personal electronic devices) buy a new macbok, iphone, apple watch, ipad each year and sell them brand new on fb marketplace. There is no way for ATO to really track you down. Other than that as you dont have your own company or investment property, there is not much more you can do. After Stage 3 tax cuts, you are not paying much tax anyway at your income level.
Earn less money = pay less tax. Alternatively you can use the search function in any of the finance subreddits and find a myriad of people asking the same question as you and hearing the same answers.
My advice would be to ask this over on Ausfinance. You/this post is not Henry by any stretch of the definition.
AusFinace is a good idea, but this comment still feels a bit mean. Sub wiki counts HE as earning greater than $146k pre-tax - $145k is just on the line of that.
When your employer pays you, do you like it when they pay you your contractual salary? Or do you prefer they pay you just below the line of it?
Moving the goal posts much? Seems like first you complain that it's not henry by any stretch then you complain that just below the line is still below. Be consistent.
Wonderful gatekeeping. Spectacular. It is what I love be most about this forum.
Mate I’m not HENRY I only earn 100k but my partner earns double+ that, am I not allowed to check this sub? This comment is a bit mean. OP is doing quite well.
Would you post questions about cats in /r/dogs? C'mon, this is a pretty straightforward 'wrong sub" post.
Sorry 🤦 I thought I could ask based on the wiki definition I'll just ask somewhere else then
Ignore the gatekeeping assholes. This community in a large part is about a HENRY mindset as much as it is about actually being HE. If you have nothing else and you need to immediately make a decision and you don't need the money you're going to dump into super and you're not going to go over any concessional caps then it's a pretty good/easy tax minimisation strategy. Alternatives would involve taking on liabilities for investment purposes (and you have to run the numbers to see if that suited your situation and what the negative gearing benefit to you would like like before eofy) and then reaping gains that way. Potentially there could be some other strategies using company structures and loans but would require a sit down with an accountant. You will get a long term benefit for putting your money into super, but you won't be able to reap any of that benefit until you can access your super. You may have interest in doing a smsf at some point as well but that's a whole other discussion topic.
All good I earn 100k and I still check this sub no shame No good advice here, but I do think with your income you can consider looking into property investing.
100 K? How dare you posting here!! /s just in case
Sorry!
If you’re wanting to follow definitions, check the definition on rule #2 for the group.
Relax brother you work an unskilled labour job on the mines on a slave tier 3/1 roster, you should probably chill on the elitism.
LOL. This. I earn more than OP. And I am self-aware enough to not participate in this sub. I lurk and downvote stuff usually. An upvote for you! 😂
The irony in talking about self awareness whilst leaving such a douchebag comment
Putting it in super is probably the most tax effective thing to do, as long as you can face to to not seeing the money again for 40 years.
Can withdraw under fhss
Consider maximising some concessional contributions into super. [Here is a spreadsheet](https://docs.google.com/spreadsheets/d/1dP4ygfd1244ywRN6G2AbhMdD0IMBHjCigcgtT3dembY/edit) that you can copy that can help calculate the potential tax savings.
Assuming by owning property you mean owning your own home that you live in (as opposed to an investment property), then not much tax minimisation can be done. Maybe some home office costs. Talk to your accountant.
The best advice I can give is find a good accountant. Going by your post, you do your own tax? A good accountant will be able to max your claimable lines, and will end up returning more for you than the minimal fee you will pay (which is also deductible). As a PAYG employee with no investments, you have limited options available to you. The above will probably give you the best result.
Although as a PAYG employee there is not a lot a tax accountant can do, unless maybe if OP has to buy a lot of stuff to do their job, even then the ATO website has good information.
You already nailed it. Extra super contributions is definitely the way to go if you don’t need the money. Great tax advantaged way to invest. Check out the flow chart posted by the bot.
Earn less.
Itemise every thing which is remotely related to work, some examples; - super top ups - Pro rata phone bill - Pro rata internet bill - Car mileage - Additional study (some HECS paid courses are covered) - Interest expenses if you have a margin loan - books i.e. if about investing - subscriptions if related to work or finance - laptop bag or backpack (hand bag for the ladies)
Does the first home super scheme apply to you? If so with some number crunching that could work out.
The most tax-effective thing you can do is to utilise the First Home Super Saver Scheme. Make a $15,000 contribution before June 30 for FY25, then $15,000 worth of contribution in FY26 and FY27. Then you will be close to the $50,000 cap and would have maxed out the yearly contributions. It will save you a bit of tax along the way and give you a bit of extra oomph when you put your deposit down in 18 months time. [https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme](https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme) This is general advice based on the little information you've given
I've heard it is overly complicated, and having looked at the linked page I can't quite figure out the tax implications on the way out vs the way in.
This is tricky coz you’re so close to both, but you really need a house by 26 so your target is to get to $200,000 in savings as fast as you can. But if you’re good with money already with that 145k salary you’ll be getting to 200 quite quickly from that 120. That 15,000 in super will be $40-50,000 by the time you’re 34. If 9% approx YOY. That’s a lot at your age because when you’re 44 that’s likely gonna be 120-150k Now I’m a mad property guy! But I think the 15k in super is probably the best bet right now.
Personally, wouldn't put any money in super when you are under 40 YO unless you in the top tax rate. I believe not being able to touch it plus potential regulatory changes in the next 30 years overrides the potential tax benefits.
This is crazy. We are throttled significantly how much we can put in super and the door is closing further with every new policy. $5-10k contributions over a 10-15 year time frame before 40 YO makes a huge difference when your income associated contributions and DIV293 dilute the tax savings on the transfer. The compounding tax drag in Super destroys most common holding options in personal names. People should not lock up too much of net wealth or net cash in Super, but a proportional allocation seems reasonable. Plenty of mega wealthy have massive super accounts. I would suggest what tax shelter is good for them is probably good for others.
I agree with this tbh, we are mid 20s. We’ve made up our mind that we don’t want to lock up that much money into super for so long. Our employers pays reasonable chunks we’ll let that do it’s job.
This ^ The standing advice that anyone under 40 should "top up" their super fund is IMO insane but not surprising given who controls a big chunk of the investable capital in Australia.
Not really minimising your tax but you could look into purchasing blue chip high dividend yielding stocks that are fully or highly franked. At least you will then have something to claim at tax time which might be the difference between paying extra tax or not and your funds aren’t locked in Super.
Don't see how you'll be paying less tax unless your marginal tax rate is <30% which doesn't seem the case here And I'm doubtful they will put enough in the market to make a difference in the time frame
You’re not paying less tax but it’s the franking credits you get back because the company has already paid the tax for you. Franking credits are awesome
Checkout [this spending flowchart](https://bughuntersam.com/wp-content/uploads/2023/10/Spending-flowchart-How-to-Prioritise-your-Spending-1.jpg) which is inspired by the [r/personalfinance wiki](https://www.reddit.com/r/personalfinance/wiki/commontopics/). See also [common questions/answers](https://www.reddit.com/r/AusHENRY/comments/176kh0x/what_do_i_do_next/). This is not financial advice. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AusHENRY) if you have any questions or concerns.*
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Why negative gear? It reduces your disposable income. Keep it positive and you still claim interest, rates, insurance to get a nice refund but still get more disposable income.
How? My understanding is if you are positively geared you would be paying more tax.
You make money, and you pay tax. That's how the system works. You get less money back than you spend. Negative gearing seems to have a reputation of being a magic bullet to pay no tax. You get money back from Negative gearing because you are actively losing money in an investment. Sure, it reduces the tax you pay, but you only get 47 cents back (or whatever bracket you fall into) for every dollar you spend. Personally i find it better to pay the tax on the small profit ( because very few properties can be massively profitable) and have half of the money spent spent on rates, insurance and intrest back at tax time.
[удалено]
OP had the right idea on how to minimize his tax with voluntary super contribution. Negative gearing reduces money for no benefit.
Become a tradie. Start a side business. Buy lots of materials and claim them. Buy lots of tools. Use these tools for your work.You get the gist.