Sadly, as Benjamin Franklin famously noted, ‘In this world, nothing is certain except death and taxes.’ While we can’t do anything about these certainties, hopefully we can help you live better while minimising your tax burden.
Paying taxes is an important civic duty and an inevitability for most. However, if your money is managed properly, you can reduce the amount of taxes you owe while still paying your fair share. Ultimately, the more of your money you’re able to keep, the better you can live.
Very few, if any of us, actually enjoy paying taxes, which is why so many people look for ways to avoid them. Fortunately, there are ways you can legally reduce your payments to the government, but not everyone is privy to these tax reduction strategies.
Get in touch with the experts at MyFuture for a FREE Discovery Session to learn how you can take advantage of these tricks of the trade and start building wealth in no time.
Ways To Reduce Your Tax Bill In New Zealand
While paying out your hard-earned money in taxes is painful, it may hurt a little less to know that the money you pay into taxes is an important civic responsibility and supports the very foundations of our society. In addition to paying the salaries of government workers, your taxes also contribute to public infrastructure like roads, bridges, pavements, parks, and other community resources. Beyond that, they enable the government to provide necessary services to help all members of society participate effectively and efficiently.
While it’s clear that paying your fair share of taxes is a responsibility we should all take seriously, it is equally important to ensure you’re not overpaying in taxes. Tax laws can be quite complex, making efforts to understand and maneuver through the tax system a frequently unbearable task. This complexity unfortunately means not everyone applies taxes properly to the things we spend on or save and we can end up paying more than we really need to.
That’s why consulting a financial adviser who has the expertise and knowledge to declutter the mess can make a massive difference in the taxes you pay and the wealth you’re able to generate. Some useful areas to consider include:
Every business has necessary expenses that eat away at their bottom line. If you provide a product or service, you already know you pay GST at 15% from any monies that you collect.
But since the tax is paid on the back end, your expenses are inputs for which you shouldn’t be paying taxes twice.
That’s why it’s important to claim as many valid business expenses as you can and maintain an accurate and detailed record-keeping system of them.
After you’ve claimed them, be sure to hold on to your logbooks and receipts for up to seven years as this is the time within which Inland Revenue can audit you.
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File And Pay Your Taxes On Time
A little due diligence can go a long way in ensuring your money is protected.
If you are self-employed, make a note of when your taxes are due in order to avoid paying any unnecessary interest or penalties.
Also, for those venturing out into self-employment or starting their own business for the first time, be especially mindful of your tax obligations on your first year’s income.
Because that first year’s income tax is only due in the second year, along with the provisional payment for that second year, quite often the newly self-employed or business owners enjoy a seemingly tax-free first year, but get caught out in a double-whammy of tax in their second.
Pay Less Investment Tax
Some investment opportunities are more tax efficient than others, so it’s important to read the fine print.
At MyFuture, we will evaluate your finances, your personal goals and needs, and the opportunities available to you. In doing so, we can steer you towards tax efficient investments that will optimise the money you earn and work with you to watch your earnings grow.
While the KiwiSaver programme is a great way to save for retirement, there are some oversights to be wary of which could end up costing you down the road.
Make sure you’re on the right tax rate for your KiwiSaver and portfolio investment entity investments.
If you should be on a higher rate and end up paying less tax than you’re supposed to, you’ll end up paying it out at the end of the year.
Also, you may end up paying penalties if you need to withdraw funds early, so paying in the right amount is paramount.
Save For Retirement
KiwiSaver is not the only game in town when it comes to funding your retirement years.
In fact, most people find that the money they save via KiwiSaver is not enough to support their personal financial goals and needs through retirement.
Contributing to a Prescribed Entity Investment (PIE) portfolio may be a good way to lower your tax bill, but there are many important considerations to take into account with regards to how money is taxed when transferring, withdrawing, or earning money on these funds.
Working For Families Payments
If you have kids under the age of 18, you may be entitled to tax credit payments with the New Zealand government to help with the costs of raising your children.
These funds depend on your income level and the number of hours you work each week. The experts at MyFuture can help you calculate your Working For Families payments if you are eligible.