Should you cherish a $1 deduction when you prepare your tax return? Well, of course you should! Below are some examples to show you that on some occasions a $1 deduction could help you to save a lot on tax.
1. When your income is right on the threshold of MLS (Medicare Levy Surcharge).
In Australia, if you are single and earn a base income more than $90,000, or you are a couple earning more than $180,000, you will need to pay MLS starting from 1% if you don’t have private health insurance including hospital cover. Imagine if you are earning $90,000, you will need to pay $900 on MLS. However if you had a one dollar deduction, you taxable income will become $89,999. You are below the threshold now and will save the $900 on MLS.
For MLS related information please visit this ATO site: Medicare levy surcharge
2. When you have HELP debt (or other study and training loan from the government) and your income is right on the threshold
If you have HELP debt, and have a taxable income of $47,014, you will need to pay back 1% of your income, i.e. $470 back to your HELP debt. However, imagine if you have $1 deduction, your income will be below the threshold and you will save this amount on your tax.
Contrary to common understanding, HELP debt (or other study loan) is actually an interest free debt. The government does add a bit to it every year based on the inflation rate, but it is still below the average interest rate on the market. So if you have a home loan it is better to save your extra cash in the loan offset account instead of paying off your HELP debt.
For more details on HELP debt and study loan please visit this ATO site: Study and training loan repayment thresholds and rates
P.S. To help you to maximize deductions, Impact Taxation & Financial Services has a customized template to help you to avoid missing any deductions. Please feel free to contact them to see how they can help you. Their email address is Brenda.email@example.com.