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 maximising your tax efficiencies.
Paying taxes is an important civic duty and an inevitability for most. However, if your money is managed properly, you can reduce the taxes you owe while still paying your fair share. Ultimately, the more of your money you can 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 tax tips 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 manoeuvre 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 when it comes to tax time.
That’s why consulting a financial adviser who has the knowledge to declutter the mess and point you in the right direction for obtaining specific tax advice can make a massive difference in the personal 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% of any money you collect in transactions.
But since the tax is paid on the back end, your business expenses are inputs for which you shouldn’t be paying taxes twice.
That’s why it’s important to claim costs for as many valid business expenses as you can and maintain an accurate and detailed record-keeping system for them.
After you’ve claimed them on your income tax return, be sure to hold on to your records and receipts for up to seven years, as this is the time in 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 savings are protected.
No matter your business structure – if you’re self-employed, a sole trader, or a business owner – make sure to record when your tax fees are due in order to avoid paying any unnecessary interest or penalties.
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 give you the best financial benefits, working 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 cost 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 pay penalties if you need to withdraw funds early, so paying 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 regard 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 from the New Zealand government to help with the expenses 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.
Discover how to pay less tax NZ-wide with MyFuture
Ready to maximise your tax efficiencies? At MyFuture, you’ll find everything you need to know about how to save tax in NZ. We’ll learn about you and your business, guide you on the ins and outs of tax planning, and refer you to the appropriate experts so you have more to save for the future. Simply fill in our contact form to arrange your FREE Discovery Session today with our financial planning experts today!