Tax Time: 5 Tips To Reduce Tax In Australia Legally with Daina Todd

Looking for the best Australian tax tips podcast to get you ready for EOFY? This episode of GET RICH is a must-listen for anyone earning an income in Australia, whether you’re employed full-time, have a side hustle, or run your own business.

Your host Molly Benjamin, founder of Ladies Finance Club, is joined by Diana Todd, founder of Balance Tax Accountants and one of Australia's most trusted voices on all things tax. Together, they break down how the Australian tax system works and share practical, legal ways to reduce your tax bill, without the stress or confusing jargon.

 In this EOFY tax tips episode, you’ll learn:
✅ The most forgotten tax deductions (and how to make sure you don’t miss them)
✅ How to legally pay less tax without getting on the ATO’s radar
✅ Side hustle vs hobby: what the ATO actually looks for
✅ Sole trader or company: which structure will save you more tax
✅ What you can and can’t claim working from home
✅ How to reduce capital gains tax on shares or property
✅ Why negatively geared properties could boost your refund
✅ Medicare Levy vs Medicare Surcharge: how to avoid the extra charge
✅ What to do if you haven’t lodged a tax return in years
✅ How much to put aside from your side hustle income so you're not caught out

 If you’re searching for an EOFY podcast episode, ATO tax tips, or how to maximise your tax refund in Australia, this one’s for you.

Press play to get savvy, stay compliant, and save money before June 30!

Want to know more, join our masterclass here.

CHAPTERS

00:00 – Welcome + Why Tax Isn’t the Enemy
01:23 – How the Aussie Tax System Works
02:14 – Most Forgotten Tax Deductions (Hello, Handbag!)
03:27 – What Records You Actually Need to Keep
05:32 – Key Tax Dates You Need to Know
06:40 – Haven’t Lodged in Years? Here’s What to Do
09:33 – Side Hustle or Hobby? How the ATO Decides
12:06 – Sole Trader vs Company: What You Need to Know
15:30 – Working From Home? What You Can (and Can’t) Claim
17:19 – Tax Brackets Explained + How to Reduce Your Taxable Income
19:41 – Investment Properties and Why They're Tax-Effective
22:03 – Capital Gains Tax (CGT) on Shares + Property
23:49 – Medicare Levy vs Medicare Levy Surcharge
26:10 – HEX/HELP Debt: What Triggers Repayments
27:57 – How Much Tax Should You Set Aside from a Side Hustle?
28:48 – Final Thoughts: Don’t Let Tax Hold You Back from Wealth

LINKS AND RESOURCES FROM THE EPISODE

ATO (Australian Taxation Office) – For all things tax, including:
- Claiming Deductions
- Working from Home Expenses
myGov – Lodge your own return online: my.gov.au

CONNECT WITH DIANA TODD

Website: https://balancetax.com.au/
Instagram: https://www.instagram.com/balancetax/
LinkedIn: https://www.linkedin.com/company/balancetax/

CONNECT WITH LADIES FINANCE CLUB

Join our free Facebook group - Ladies Finance Club Money Chat
Website: https://www.ladiesfinanceclub.com/
Instagram: https://www.instagram.com/ladiesfinanceclub/
LinkedIn: https://www.linkedin.com/company/ladies-finance-club/

TAKEAWAYS

• The Australian tax system is progressive, meaning higher income leads to higher tax rates.
• Many people overlook deductions like work-related expenses for items such as handbags.
• Good record-keeping is essential for maximizing tax deductions and avoiding overpayment.
• The financial year in Australia runs from July 1st to June 30th, with tax returns due by October 31st.
• Individuals with side hustles must understand the difference between hobbies and businesses for tax purposes.
• Choosing the right business structure can impact tax obligations significantly.
• Home office expenses can be claimed, but it's important to keep accurate records.
• Contributing to superannuation can be a tax-effective strategy before the end of the financial year.
• Investment properties can provide tax benefits, especially when negatively geared.

SOUND BITES

"Good record keeping will save you real dollars."
"The financial year goes from July 1st to June 30th."
"Get caught up as soon as you can."
"Tax is not taught in the school system."
"You can contribute to your super before June 30th."
"Investment properties can be negatively geared."

TRANSCRIPT

[00:00:00] Molly: Welcome to another episode of Get Rich, the podcast that helps you do just that. Get rich and stay rich. I'm your host, Molly Benjamin, founder of Ladies Finance Club. And if you legally wanna pay less tax, because let's face it, we all do. Then make sure you listen in to today's episode because I am joined by tax expert and founder of Balanced Tax Accountants, Diana Todd, who breaks down the Aussie tax system in a way that makes sense.

[00:00:29] So we're gonna be covering what are the most. Forgotten tax deductions, side hustles versus hobbies. What do you do if you haven't returned a tax return in a few years? And how to make the most of maybe an investment property your super working from home expenses and avoid nasty surprises when it comes to hex and the Medicare levy.

[00:00:48] So whether you are a business owner, you have a side hustle, or you are employed full-time, this episode is packed with practical tips to help you build wealth and Payless tax. Legally the key word being legally. All right, hit that subscribe button and let's get into it. So let's jump straight into it.

[00:01:07] We're talking all things tax here and as I mentioned it in the intro, you know, we've gotta embrace tax. 'cause when we pay tax, it's a good thing. It means we've made money and we like making money. So can you just give us a really high level version? How does the tax system work in Australia?

[00:01:23] Diana: So the tax system basically is designed that the more income that you make, then the more tax that you pay and the percentages and the way that they work, climb higher, the higher your income is.

[00:01:35] And it's all kinds of income that is taxed in Australia. Australia is actually one of the most highly taxed countries in the world. Mm-hmm. And. It's because of all of the public services that we have access to living in this country. Yeah. And that's gotta get paid for and funded somehow. And it's through taxes.

[00:01:52] So for individuals, basically the more money that you make, the more tax that you pay as a percentage. And this is why it's so important to educate yourself and know what it is that you're eligible to claim. Mm-hmm. So make sure you're never overpaying tax.

[00:02:07] Molly: Absolutely. So I wanna jump straight into, and obviously this podcast episode is called How to Legally Pay Less Tax, not Illegally.

[00:02:14] So we're keyword being legally here. So what is like the one tax deduction at tax time that most people forget about?

[00:02:21] Diana: So one little known tax deduction that is not like highly like talked about very much is if you actually buy this one's for the ladies. Also the men as well. If you actually buy a handbag that is used for work.

[00:02:34] Or for your business, then you can claim the business percentage of your handbag for tax. So like for me, when I go traveling, I like to shop duty free and you know, pick up a couple designer things here or there. And I'll often buy myself laptop bags. Because my laptop bag is fully for carrying my work laptop to and from work and to see clients and things like that, I can claim the full cost of that off of my tax.

[00:03:00] Molly: Yeah. Okay. There you go. Any other ones that you come across where you're like, oh, people don't know about this one. I think

[00:03:07] Diana: that the rest of it is probably gonna come out later into this conversation, but the one piece of advice I could start off with is that the tax system favors you keeping records.

[00:03:17] And I know that sounds so boring and it's so basic, but it is so true because good record keeping will save you real dollars in your tax return.

[00:03:27] Molly: And when you say record keeping, are we talking about receipts? Are we talking about just making notes on like a spreadsheet or in a notebook?

[00:03:35] Diana: I would say all the above.

[00:03:36] And what I would do is, 'cause I know it can just seem like a big task, right? And so based on how it is that you like to keep records, if you're a paper girly, then keep them in a shoebox. I'm not gonna hate on that because at least you've got the records. If you are more of like, you know what, I only live on my smartphone.

[00:03:54] I never really touch a computer. Create folders in your email drive so that way you can, you know, have tax deduction sitting there when the emails come through. Receipts for your purchases. If you are super organized and have like an app, if you're running a business, then store copies of the receipts in there.

[00:04:10] But basically any records that you can keep in terms of what you buy and pay for when it's relating to your income, your work, your business, your investments. Then all of that can be really useful at tax time to get the tax dollars savings on tax dollars.

[00:04:26] Molly: And is there like a rule of thumb of like if it's under $50, don't worry.

[00:04:30] Or if it's under $300,

[00:04:32] Diana: there's actually no threshold, unfortunately. Right. So yeah. Basically, if you claim it on your tax return as a tax deduction, the a TO has up to seven years to come back and ask to see a copy of the receipt. The a TO actually is recommending now that people keep digital copies just because the ink on actual paper receipts Yeah.

[00:04:51] Isn't meant to last seven years and often fades. So to be safe, take a photo and yeah, like you've gotta have a receipt for everything that you claim in case the A TO asks you. Awesome. Okay,

[00:05:03] Molly: so if you are starting fresh with your tax, that might be a great thing to do. Either set up those folders on your email or even take a photo of the receipts.

[00:05:13] Does that still work if we take a photo of them and have a digital copy on our like G Drive or something?

[00:05:19] Diana: Oh, a hundred percent, right? I mean, we live in 2025 World of Technology. Let's use it. Taking stress outta tax, making sure we don't miss out on tax deductions. I'm all for it. Yep. And key dates.

[00:05:32] Molly: So the key dates we kind of need to know, can you just take us, when does the financial year start and when do we need to have our tax done by?

[00:05:39] Diana: Sure. So the financial year, the tax year goes from July 1st every year up until June 30th. So the rule in the tax world is that if the bank transaction occurred or the money was spent or received in that tax year, then that is the year it's reportable. So sometimes you'll have transactions where you go to buy something on June 30th, but the actual money doesn't leave your account till July.

[00:06:04] First, then the July 1st date, the day that the money was actually spent, that's the year that it would go into the tax return. In terms of due dates, if you lodge your return yourself, the due date is October 31 every year. So you've got from July until October 31 to self lodge, which you can do through myGov, or if you use a registered tax agent, then you often get an extension until May 15th of the following year.

[00:06:30] Molly: Okay, awesome. And if someone's listening and they're like, holy hell, I have not done my tax return for a few years, what happens in those situations?

[00:06:40] Diana: The best thing I can say is to just get caught up as soon as you can. The A TO does understand that sometimes life gets in the way, but as they have been instructed.

[00:06:51] Very recently to make sure that all Australians get their tax returns up to date and any debts owed to the A TO are paid. They're very interested in everyone lodging their taxes on time and paying tax debts as they're due. And I would dare say if there's any business owners listening, then they 100% will be aware of this because the a TO has had a massive crackdown on business owners paying their tax debts on time.

[00:07:16] Yes. Big

[00:07:17] Molly: time. And so for the people who might be listening for the women or men who might be listening, they're like, oh my God, I haven't done, 'cause I did speak to a lady once and she hadn't done it for 10 years and she was stressing out and I was like, it's okay. Just go speak to accountant. They can help you sort it out.

[00:07:32] She didn't get charged any additional fees.

[00:07:34] Diana: No, and that's the thing, I think that's the thing that's hard about the a TO is they're quite inconsistent. So while they have authority to fine and charge penalties, they sometimes choose not to do so. Yeah. So you just never know if that's gonna beat you. If you do get fined, then you can always ask to remit it, but it's at the discretion of the A TO and sometimes it can be a little bit of a lengthy process to apply for that.

[00:07:58] So that's to avoid it if you can. Yeah, someone comes to me and they have 10 years of tax returns due, then I just do my best to make them, like, first of all, I'll encourage them and say, you know what? It takes a lot of bravery to actually take action and to get this sorted. So well done. You and I try not like personally to make them feel bad about that.

[00:08:18] And it's more about focusing on, okay, what do we need to do to get caught up and how do we make sure this doesn't happen again?

[00:08:24] Molly: Yeah, absolutely. And even when I moved back from the uk, um, my accountant was like, oh, you haven't paid tax on this year, this year, and this year. And I was like, I was 16, 17, and 18.

[00:08:36] And they're like, yeah, you still have to lodge a return. So then we had to go back and he had to just lodge a return for me.

[00:08:42] Diana: Yeah, that happens. Uh, and I think that's where, because tax is not taught in the school system, we. Have a lot of situations where people just aren't aware that they're not following the rules.

[00:08:53] 'cause they didn't know what the rules were to begin with.

[00:08:56] Molly: So for any parents listening whose kids might be working or they might have a job, they're gonna have to, those children gonna have to submit. Tax returns.

[00:09:05] Diana: If they're on payroll, so they receive income and there's tax withholding from their wages, then a hundred percent they're gonna have to submit a tax return for that year.

[00:09:14] And you know what, this could be something that could be really fun to do with your kids, is to get them to log into their myGov and connect the a TO and have a go at doing it themselves. And then. What a better place to start than when you're a teenager, to learn like what records you need to keep, what you can claim off your tax.

[00:09:30] So yeah. Awesome. And then

[00:09:33] Molly: going a little bit more into that, so sometimes I'll speak to women, they'll have side hustles, sometimes they're hobbies. So in the odd of the 80, oh, what is a hobby verse? A side hustle.

[00:09:44] Diana: Okay. So basically. Where it comes down to is there's no magic number that says, oh, if you're earning X amount of dollars, then you have to report it as a business on your tax return.

[00:09:55] Right? So what it more of is, is the A TO takes a more holistic approach where it's, does it walk, talk, act, and smell like a business? So are you consistently keeping records? 'cause businesses keep records? Are you consistently trying to get new customers, conduct marketing, advertising activities? Then it needs to be reported because businesses.

[00:10:16] Need customers to survive. Do you have insurances in place? Right? Only businesses have insurance. Side hustles might not have insurance. So this is where when you get to the territory where you're acting and you're walking and talking like a business, then it's time to start to report it on your tax. Now, there is for startups and side hustles, basically there's these rules called non-commercial loss rules, where if you are to start.

[00:10:42] A side hustle and it were to turn into a business for tax, right, and it's time to report it. Then basically what I found is a lot of people will have a loss the first year or two because it takes a lot of money to set up a business or a side hustle, and all of that is claimable. Right, as long as you're making sales.

[00:11:00] And what I'll find is that in tax returns, the startup expenses will be greater than the sales brought in that year, especially the first or second year. And what people often don't know is that you can't claim those losses against your other. Income from your investments or from your job, you can only claim that income against that side hustle.

[00:11:20] So what happens in the tax return is that loss gets carried forward to the next tax year to be claimed against future income from that business. Once your business makes more than $20,000 in sales in a tax year, then you're eligible to claim the losses of that business against other income. But until that point, then you've just gotta keep carrying for the losses.

[00:11:41] Until your side hustle or your business has made 20,000 in a year in sales.

[00:11:47] Molly: Okay, awesome. And I know side hustles are very popular with our audience. A lot of them are doing it. So what, just high level, some things you need to think about re if you wanna trade as a sole trader or trade as a company. And can you start as one and then slowly kind of graduate to the other?

[00:12:06] And then just for my final question on that point, rule of thumb, how much should we be putting away for tax on the side hustle of money we're making?

[00:12:15] Diana: Got it. Okay. So basically there's a couple different business structures in Australia, and the taxes work slightly differently for each type of structure, right?

[00:12:24] The most simplest form is sole trader. That's where you have an A, BN in your own personal name, and basically that's free to register through the Australian Business Register and. If you have a sole trader, A BN, then that goes in your personal tax return. So you don't do a separate business tax return for your sole trader business.

[00:12:42] It's included in your personal tax return that you've always done with the A TO.

[00:12:46] Molly: So then you get taxed at your personal tax. Threshold. Yeah.

[00:12:50] Diana: Okay. Right. Yeah, that's right. Then other people who wanna take it a little bit more serious or a step further, 'cause I'll say that probably 80% of businesses start off as a sole trader business structure.

[00:13:02] So there's nothing wrong with it, and if you do start as a sole trader structure, you can actually transition to another structure like a company or a trust. Mm-hmm. So these are structures where they're their own separate legal entities and they would have their own abms. That wouldn't be in your own personal name.

[00:13:18] They cost a little bit more. You'd either need lawyer or accountant help to register them in most situations. And the tax laws work quite differently for trust in companies.

[00:13:27] Molly: Mm-hmm.

[00:13:28] Diana: Companies are the most common, I would say. And they have a flat tax rate of 25% if you're running a small business through them.

[00:13:35] Okay. And basically if you have a company, then it has its own. Tax return outside of your personal tax return? Yeah, it's typically when your business starts to get to the level where you have sales of a hundred thousand dollars a year, or sorry, net profit rather of a hundred thousand dollars per year.

[00:13:54] That's when you might wanna look at changing from a sole trader to a company structure. Or if you are a hustler homie and you've got multiple streams of income from investments, maybe a job and you have a business, then. Your situation might warrant where your taxable income is near that a hundred thousand dollars.

[00:14:11] You might wanna become a company for your business a little bit sooner to help you save the tax dollars. But you've also gotta weigh up the fact that companies cost money to run every year. You have to pay manual fees to ASIC and they need their own tax returns. So, uh, you gotta weigh up the cost of actually going down that path and how long term the business is Yeah.

[00:14:31] Before you go through it.

[00:14:32] Molly: And, and when you say net profit, so that's profit with the taxes taken out.

[00:14:36] Diana: So net profit is your sales, less all of your business expenses, which are your tax deductions, and then that number that's left is your profit. Yes.

[00:14:47] Molly: Great. And a way I always remember that was this one that Lisa Simpson of a financial counselor told me.

[00:14:53] She goes, if I put my net in the ocean, I can only take. What's in the net home with me? And I was like, I know. For some reason that made it really clear for me. I was like, oh, okay. I get it now.

[00:15:04] Diana: Love the play on words. Yeah, it's so funny 'cause I think that especially in marketing, people are so focused on sales.

[00:15:10] Yeah. But really the best businesses are the ones that have good net profit because that means they're not spending all their money making the sales. They have profit that they can use to pay them, pay the owner, or reinvest back into the business.

[00:15:22] Molly: Yes, absolutely. Awesome. Okay, so just jumping back to claiming, um, so a lot of us are working from home now.

[00:15:30] So when we're working from home, I know we talked about records to keep. What sort of things can we actually claim? So what kind of record should we be keeping? I.

[00:15:39] Diana: Working from home deductions, there's normally two paths that people go down. So the lazy easy way is to, I like that way the cents per hour, where the A TO every year has a certain cents per hour rate that they come up with, and you just have to track how many hours you did work from home.

[00:15:58] So one thing new last year, the A TO introduced is they do require you to have a logbook of your. Working hours from home, uh, you could use like your Outlook or your Google Calendar Yeah. As a guide, but basically, uh, to justify how many hours that you're claiming. And if you go down this path and use this all inclusive rate, then it's meant to cover any expenses.

[00:16:18] That you incur working from home. So electricity, water, all of your computer, all your tech, everything. So that's an all-inclusive rate. Like now for those who are up for a challenge and might wanna get some more tax deductions mm-hmm. They could use the percentage of their like actual home rate. Yeah. And this is where you work out.

[00:16:38] The room that you're working from in your house, what percentage of your house is that room? Is it 10%, 15%? It's gonna be different for everyone, and you can claim a percentage of your utilities off of your tax as home office running. On top of that, you can also claim all of the things that you buy to fit out your office.

[00:16:58] So that includes like any plans, any. Mice, keyboards, laptops, stationary, things like that where you're not eligible to do that if you use the all-inclusive rate, the lazy rate.

[00:17:09] Molly: Okay, awesome. Great. So we've obviously got different tax brackets in Australia for the different levels depending on what, how much you are earning, as you mentioned before.

[00:17:19] And these change kind of year by year. So the government brings them out. They're like, if you earn between this much and this much, you're gonna be taxed at this percentage. If you are. Just above one of the tax brackets, what are some things you can do to get yourself back into maybe a lower tax bracket?

[00:17:38] Diana: If you're earning income that bumps you into another tax bracket, I'm never gonna tell you to stop earning income, earning as much income as you can. Yeah, because you're never gonna pay more tax than you keep on it. Yeah. Okay. Because the highest tax rate in Australia right now, even if it, if you're at the top tax bracket, is 47%.

[00:17:56] And I would say that there's very few people in that tax bracket, even though they do exist. Right. So for most people, the average tax. Rate that they pay in their tax returns is around 30%. Mm-hmm. So if you're the average person in Australia, then you're still gonna keep 70% of your money. 30% goes to taxes.

[00:18:15] Right. But what you can do to get your tax down or into the lower bracket is to claim tax deductions, and that's educating yourself on your unique situation and what you're eligible to claim for your investments, for your job, for your business. And so a little bit of education can go a long way into increasing the tax refund or reducing tax owing.

[00:18:37] Molly: And is would a quick win, and I know you can't give financial advice, but would a quick win be like put extra into your super if you haven't fulfilled your super threshold?

[00:18:48] Diana: That's right. There is a cap on concessional contributions every year that can be claimed. But yeah, if you have room in your super contributions cap, then you can contribute to your super.

[00:18:58] You just gotta make sure that you pay the money to the super and they receive it before June 30th. Yes. And also that you file a notice of intent to claim with your super fund as well. So they know you're gonna claim it as a deduction, but that is one way.

[00:19:11] Molly: And if you don't file the notice to then their intent to claim what happens.

[00:19:17] Diana: Then when you go to lodge your return, the a TO will let you know that it's not eligible to be claimed as a tax deduction and they will add it back into your return. So it's really important that you dot your I'S and cross your T's when it comes to claiming super on tax. Definitely.

[00:19:31] Molly: Okay, awesome. So I guess when it comes to investment property, why do people call investment properties So tax efficient?

[00:19:41] Or do they? I mean, two ways. I always hear people go, oh, property. And even with my investment property, like it was like it was the first time I got a refund back in a long time.

[00:19:51] Diana: Yeah. So with investment properties, it either goes one or two ways. It's either positively geared or negatively geared. And what do we mean by that?

[00:19:58] So positively geared investment properties are ones that after all of your tax deductions are claimed the. Income, the rental income is higher than what the deductions are. The holding costs of the property to the owner. Yeah. And so therefore, there is gonna be income that's gonna be added into your return.

[00:20:15] And I think that where most people win, quote unquote, win with investment properties and tax is when it's negatively geared. And that's where the holding costs are actually higher than what the rental income has brought in. So there's a loss sitting on the property. You're allowed to claim that loss against other income in your tax return, like other investments.

[00:20:33] Uh, wages, things like that.

[00:20:35] Molly: Yeah, and I think for a lot of ladies that I've been speaking to lately, their properties are negatively geared, so they're still taking out of their own pocket to pay some of those rent and expenses every single month. So then people can claim that against. Their tax.

[00:20:51] Diana: That's right.

[00:20:52] Yeah. So property owners are allowed to claim pretty much any expense other than travel that is related to them owning and managing their investment property, pest control, any type of damage that was left, or repairs that need to happen, property fees.

[00:21:08] Molly: And how does depreciation work on that?

[00:21:11] Diana: So the way depreciation works is normally with a property, you have two elements of it.

[00:21:16] You have the building. Yeah. And then you have what's inside. And so basically the building is typically claimed over 30 years. And then what's inside comes down to what type of fit out you've got. Yeah. What I would recommend is getting a depreciation schedule done by a quantity surveyor, and then they'll prepare a report you pay one time, and then they'll have the depreciation schedule laid out for you for the next 30 years of the property.

[00:21:41] Wow. And then you just look at the schedule every year when you do your tax and claim the amount for the year that you're in.

[00:21:46] Molly: So I did this. I went online. I had a recommendation, got a depreciation schedule. I think it cost me $500. And so now that my accountant has that and I don't like, I just do that one time.

[00:21:58] Diana: Yep, that's right. Yep. One time for when you buy the property. Yeah.

[00:22:03] Molly: Okay, excellent. That's a great fact to know. And also, when it comes to selling investments, how can I reduce the TA capital gain? So a lot of our ladies listening, they'll be buying shares or ETFs. So let's say they buy some shares, they sell it within the year, they would have to pay more tax than if they held onto it for 12 months.

[00:22:24] Is that right?

[00:22:25] Diana: That's exactly right. So basically there's two ways that I see investors lose out on tax deductions or overpaying tax. One is that they're not aware of the 12 month rule. Yeah. So basically if you hold the investment for 12 months or longer, then you're eligible to claim a 50% deduction on the tax when you sell that security.

[00:22:47] The other deduction that I find that people miss is they don't keep proper records of how much it costs them to buy it. So it's not just the cost of the actual share. But also any brokerage fees or any costs that you incurred in actually getting and securing the investment. And then that is also gonna help you reduce the capital gains tax when you go to sell.

[00:23:06] Molly: Absolutely. And I always recommend to people to set up a Google Sheets or just an Excel spreadsheet, and every time you buy and sell, just pop it in the spreadsheet. Also, if you can't find the amount you bought it for, can't remember. Just go to the broker website, whether it be CommSec, nabtrade, Perla, self Wealth, whichever one it is, Mumu, and it will have the records there for you of what price you actually paid for it.

[00:23:32] So that is a great hint there. Alright, now we always get questions on this and people I think are still quite confused around the concept of Medicare levy and Medicare surcharge. Can you break this down for us please?

[00:23:49] Diana: Sure. So Medicare levy and Medicare levee surcharge, while they have two similar names, are a little bit different from each other.

[00:23:56] Yeah. Basically everyone, unless you're, uh, in a very, very low income bracket, would pay the Medicare levee. Yeah. And that is just an additional tax to cover healthcare in this country on top of income tax. And it's included in your tax return. Yeah. Now the Medicare levee surcharge is the one that we have a little bit of influence and control over, basically.

[00:24:19] If you have a certain level of private health insurance, then you can get out of paying the Medicare levee surcharge once you're over the age of 30. So it's really important to weigh up the cost of having private health cover versus paying for that additional Medicare levee surcharge. Awesome. So if someone's on a hundred

[00:24:39] Molly: KA year, would they be better off getting private health insurance so they don't have to pay that surcharge?

[00:24:45] Diana: Most likely because at a hundred KA year you're sitting in like a 30% tax bracket. Yeah. So yeah, that's definitely something to weigh up. I mean, also there's the perks of having private health cover where you wouldn't have to wait for the public system if you were to need hospital care. So I mean, there's also that besides the tax.

[00:25:05] For teachings to think about because

[00:25:06] Molly: I know, um, when we've done the math before on master classes in the past, it was pretty much like what you are paying in the surcharge is less than what you'd be paying if you just got a basic private health. Coverage. So therefore they would be better off getting that hospitals, that basic hospital coverage.

[00:25:26] Diana: Yeah, and that's what you'll find is a common theme in tax law is the tax law is created by politicians, right? So politicians want to influence consumer spending, so. The way the tax law is set up is because politicians want the Australian public over the age of 30 to have private health cover. That's why they create these incentives of a, if you've got a certain level of private health cover, you don't have to pay the Medicare levee surcharge, right?

[00:25:52] Yeah. On your tax return. And so this is like peppered all throughout the tax law. But basically, this is great example right here of it.

[00:25:59] Molly: And you can understand why as well, because that would take off such a huge pressure on the public health system as well, which is there for, you know, vulnerable, but Aussies an emergency, that kind of situation.

[00:26:10] So I guess it's a way to keep it kind of separate as well. Yes. So thank you for explaining that one and with Hex and student debt. So I know there's been new rules that have been bought, added around the index, the tax index, and we did touch on it very briefly in another podcast episode, but can you just break it down for us?

[00:26:31] Diana: Sure. So basically once you earn a, above a certain level, it's around $45,000 in taxable income. Then you're required to pay a percentage of your hex debt back in your tax return that year. Now, if you have a job and you filled out the forms, uh, when you first were onboarded as an employee with your employee.

[00:26:50] Lawyer, you would've let them know that you have hex debt, so they would be tracking that and taking it out for you. Basically through pay as you go withholding. If you're running a business and you don't have wages, income, then it's on your, it's on you to save tax. Just like to save for your hex repayment, just like you have to save for income tax.

[00:27:07] Now, basically. One thing that people don't realize is once you get over the $45,000 threshold, it starts with 5% of the, of your income. Okay? And so, and it goes up a percentage. So the more income you make, the higher percentage you have to pay back of your hex. And this often catches people off guard because it can increase quite quickly where they're paying like a 5,000 or a $7,000 hex repayment in their tax return.

[00:27:33] And if they weren't prepared for that, uh, that can be quite a shock to the system. But yeah. Basically with indexation that is done at, on the 1st of June every year to basically adjust the HX step for inflation because time value of money changes as we go along in life. Yes.

[00:27:50] Molly: Awesome. And just another question we had from our audience around going back to the side hustles.

[00:27:57] So let's say this lady was making. Extra thousand dollars a month. She just wanted to know, which I think is, um, I think this is a true story. I think she's making a thousand dollars a month. She just wants to know, like, to be completely safe. How much tax should she be putting aside of that? A thousand dollars each month?

[00:28:14] Diana: So I'm assuming she has some type of employment or regular cost. She's already got a regular job and this is just

[00:28:20] Molly: like her markets. Side hustle on a,

[00:28:22] Diana: to be safe, I would just always say without knowing any other situation or details, 30%. 30% of the net profit. Right. Because you don't pay tax on the actual sales.

[00:28:33] You have to also factor in the fact that you spent money to make that money, your tax deductions for business. Right. So it's 30% of the net profit.

[00:28:42] Molly: Yeah. Okay. Awesome. Alright, is there any other questions you think the audience would wanna hear about or.

[00:28:48] Diana: To be honest, we covered so much. But because I know a lot of your audience, a lot of people listening would want to build wealth while also being tax smart, right?

[00:28:57] Yeah. And there is a point where you might have to choose between paying a little bit more tax or earning more money. Earning more investments, buying more investments, things like that. And as a tax accountant, I will always say, sure, we can reduce tax where we legally can, but at the end of the day, you're always better growing your wealth portfolio.

[00:29:18] So if like, do not let tax stop you from buying that investment property or buying the shares just because you feel like all the more money I make, the more tax I pay, they will never tax you more than you keep. On your investment income, and there's a lot of incentives like we talked about here, where if you hold the investment for longer than 12 months and you sell it, then you get a 50% discount on capital gains tax, things like that, that would help you not overpay any tax, right?

[00:29:44] So if you're weighing up between making more money, then go for it, reach for the scars, and just hire a really good accountant or educate yourself on what the rules are around your situation and what you can claim and make sure you don't overpay tax. Love it.

[00:29:59] Molly: And if people are loving this conversation and they want more of you, where can they find you?

[00:30:03] Diana: My accounting firm is called Balance Tax Accountants. We're at balance tax.com au. We're also on all the socials on at Balance tax. And then in, I have my own personal brand where I share money tips and things like that. It's Diana Todd. Awesome. Great. Well, thank you so

[00:30:20] Molly: much, Diana, for joining the podcast today.

[00:30:22] Diana: Thanks for having me.

KEYWORDS

Australian tax system, tax deductions, tax returns, side hustles, business structure, home office expenses, investment properties, Medicare levy, HECS debt, wealth building