How to save tax: Get your car and all running costs under your pre-tax income

Everyone would love to pay a little less tax. We probably feel it most when we glance at our payslip and see how much has gone to the tax man, never to be seen again.  Those in the know limit the amount of tax they pay and spend their tax savings on things they enjoy, like an annual holiday or a brand new set of golf clubs. But how do they do it? And isn’t it all too hard and complex? 

Simple ways to save on tax

There are a few really easy things you do to reduce your tax bill. Firstly, you can consider any items you’ve paid for that are exclusively or partially for work use, such as clothing, software, travel, etc. If you wouldn’t otherwise have made these purchases and you did so for work reasons, there’s a good chance you can claim them. You can also partially claim any charity donations you’ve made. Of course, having private hospital cover is a no brainer to help you avoid the medicare levy surcharge. But there’s a much bigger saving than all of those, and if you – like most Australians – drive a car, you might want to pay close attention. You can save thousands of dollars off your tax bill each year and instead put that money towards owning a car – all you need is a novated lease.

What’s a novated lease?

A novated lease is essentially salary sacrifice for your car. It’s a simple arrangement between you and your employer where your employer agrees to pay for your car out of your pre-tax salary. You might have heard of salary sacrificing smaller items, such as a laptop or a mobile phone, but these items don’t make too much difference to your tax bill. Something you’re going to spend a large amount of money on though, like your car, can make a world of difference. You can roll all of your running costs (rego, fuel, servicing, insurance, roadside assist) in the package to pay even less tax too.