The Australian Tax Authority operates a progressive tax system. This means that those in the smaller tax bracket are taxed less while those in the bigger tax bracket are taxed more. The more you earn in Australia, the more you pay as tax.
Aside from practicing the progressive tax system, there are a number of deductions and offsets that a person can take full advantage of when filing his or her tax returns.
Below, we have taken a look at some of these tax offsets and deductions available to the Australian taxpayer.
In Australia, taxpayers can claim deductions for expenses incurred in earning their taxable income.
Common Tax Deductions in Australia
- Work-related expenses: This includes expenses such as uniforms, self-education, and tools and equipment required for your job.
- Home office expenses: If you work from home, you may be able to claim a portion of your expenses such as electricity and internet.
- Donations to charity: Taxpayers can claim deductions for donations made to approved charitable organizations.
- Investment expenses: This includes expenses such as investment advice and management fees.
- Car expenses: If you use your car for work purposes, you may be able to claim a portion of your expenses such as fuel and maintenance.
- Gifts and donations
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Vehicle and travel expenses
In addition to deductions, there are also tax offsets that can help reduce your tax liability. Tax offsets, also known as rebates, directly reduce the amount of tax you owe.
If your taxable income is: $37,500 or less, you will get the maximum offset of $700. Between $37,501 and $45,000, you will get $700 minus 5 cents for every $1 above $37,500. Between $45,001 and $66,667, you will get $325 minus 1.5 cents for every $1 above $45,000.
Some Common Tax Offsets Available to Taxpayers in Australia
- Low-Income Tax Offset (LITO): This is a tax offset for taxpayers with low taxable income.
- Senior Australians Tax Offset (SATO): This is a tax offset for senior citizens.
- Private Health Insurance Offset: Taxpayers who have private health insurance can claim a tax offset to reduce their tax liability.
- Dependent (Invalid and Carer) Tax Offset: Taxpayers who care for a dependent with a disability can claim a tax offset to reduce their tax liability.
It’s important to note that the eligibility for deductions and offsets depends on specific circumstances and the rules can change from year to year. Taxpayers should seek professional advice or consult the ATO website to understand their entitlements and obligations.
