How do people pay less taxes legally, without getting in trouble with the authorities? In Australia, most people assume that the ATO is a bunch of bumbling fools that couldn’t find their feet with a map. Not true. They might be taking more money than they deserve, but they definitely know what they are doing.
There are two types of tax reductions. One is tax evasion, and the other one is tax avoidance. Both are two separate methodologies. One is legal, and the other one is illegal. According to the recent Guardian article, there is an interesting trend that rich people pay fewer taxes than they have even before. Most of the high-income earner pays fewer taxes. The tax saving is an essential part for the wealthy people to get their income pool wider. Some people use tactics to avoid paying taxes and, for example, claiming negatively geared property, establishing offshore companies or foundations, etc.
There are various ways to save taxes; the distribution of income among the family members is another way to save tax; you can also set up a company.
There are two ways you protect your wealth and learn how to pay less taxes or another way you give money to the government, and he is responsible for all that money.
The super-wealthy people setup their tax structures through offshore setup foundations, and they set up tax-efficient business structures. Most high-income earners learn how to pay fewer taxes to establish their business internationally to escape tax rates.
Some techniques and strategies to pay legally fewer taxes relate to the property, retirement and estate planning, family contribution, etc.
You could separate your foreign income and transfer some of your income abroad to obtain some benefit by paying less tax over there and utilizing the process in a foreign regime.
Establishing a separate corporate vehicle is also beneficial as the companies’ taxation structure is more flexible to incorporate previous losses and pay taxes at lower rates. Furthermore, various tax expenses are tax-deductible for corporate companies; you can claim the training and educational expenses and deduct all the costs incurred in connection to running the company/business.
Moreover, making a charitable donation results in a reduction in tax liability, and any contribution to the charitable organization is tax-deductible to some extent.
A detailed record of all your expenses incurred during the year is required to provide better tax advice. However, there is no need to worry as a reliable estimate could be made identifying the trends of your spending in case of limited records are available.