Tax Saved Is Not Money Made

In this episode, Mai and Lee break down one of the most common misconceptions at tax time:

 “If I spend money, I’ll get it all back in tax.”

With the end of financial year approaching, many business owners and individuals fall into the same trap. That is, making rushed purchases purely for a deduction, without considering the actual return.

This episode cuts through that thinking.

Mai unpacks why tax deductions don’t work the way most people assume, and why the real goal isn’t to reduce tax at all costs. It’s to make financially sound decisions that deliver a return.

From understanding your effective tax rate to making strategic investment decisions, this episode is a must-listen for anyone navigating EOFY planning.

In this episode, Mai talks about:

• How your notional (average) tax rate determines what you actually get back
• The EOFY “spending frenzy” mindset
• The $20,000 instant asset write-off threshold and when it applies
• Why buying assets you don’t need destroys cash flow and ROI
• A smarter alternative: using super contributions to reduce tax and build long-term wealth
• What deductions are most commonly missed (travel, WFH, self-education and more)
• Why record-keeping is critical to substantiating claims

Spending money for the sake of a deduction can leave you worse off. Mai encourages you to do a sense-check before any EOFY decision: “Would I do this on 1 July?”

If you're unsure what EOFY strategies actually make sense for your situation, reach out to Mai on Instagram at the_maiharris or submit your questions via the Ask Mai link at the top of the show notes.

Learn more about My Accounting Advantage

Disclaimer

The advice contained in this presentation is general in nature only and should not be acted on without first seeking professional advice.

Your personal circumstances have not been taken into account, and you should consider the appropriateness of the advice to your individual needs.

Transcript

Welcome And The Big Myth

Speaker 2 0:00

Hello and welcome back to the podcast My Accounting Advantage featuring Mai Harris. My name's Lee Woodward, your host for the day, and joining us again with this incredible information is Mai Harris. Mai, welcome back to the program. Thanks, Lee. It's so lovely to be back. Last week we had so much depth information about all these things going on in this wonderful world. And

Why Deductions Do Not Pay You

Speaker 2 0:25

today, as promised, tax saved is not money made. Explain this one.

Speaker 0:32

Okay, this one is really coming up because of the end of the financial year. Because usually the first question that I get asked before the end of the financial year is, should I buy something so that I can claim tax deduction for? I often have, you know, a business owner coming in and go, Oh, I'm just going to buy this car so that I can get tax deduction for. And I'm like, why? What's wrong with your car now? He said, Well, I just want a tax deduction.

Speaker 1 1:07

It's like the Boxing Day sales. I don't need any clothes, but I should buy some.

Speaker 1:12

Yes, it's it really is. People gotta understand that, you know, you're not going to get the full amount of the full amount back from the government. And if you haven't paid tax, well, you're not gonna get any tax back as well. Because a lot of people go, well, hang on, I've just spent, you know, $1,500 on a laptop and I'm gonna claim it. And um where's my refund? And I'm going, well, no, you haven't paid tax this year, but you bought a laptop. So you're not gonna save anything on tax, even though if you write that one off, write the laptop off, and you were paying tax, you're only going to get, for example, 20 cents in a dollar, you know, back from tax because that's your average tax rate. You're not gonna get 100% back. So you're still really forking out the the other 80%.

Average Tax Rates Explained Simply

Speaker 2 2:09

So what should we do at this end of financial year thinking crazy frenzy that we go through?

Speaker 2:14

Yeah. So number one is to understand that um, you know, you're only going to get tax back, a tax refund in line with your overall tax rates. We call it notional tax rates. So, for example, if you earn up to $130,000, your notional tax rate, your average tax rate is about um 25 um percent. So which means that if you m uh pay for uh tax deduction, you will only receive a tax benefit of 25%. So one dollar, you'll get 25 cents back, not the whole lot.

Speaker 2 2:56

So we have to break this belief.

Speaker 2:58

Yes, you really do need to break this belief. That's a key point one. Break the blue. That's right. And if the if you're a business owner as well and you wanted to invest in a new car because you need one, don't just go out there and buy something that you don't need because that's just money going out for no reasons. There's no return on investment there.

Speaker 2 3:19

I like your reality on this. It's uh a deduction reduces costs, never reverses it.

Speaker 3:24

No, that's right. So, and then another thing too.

The 20k Instant Asset Write Off

Speaker 3:28

So if you wanted to invest in um equipment and so forth, and you think, oh yes, I gotta go and spend, you know, $28,000 on um an uh an asset, like an equipment, and I'm just gonna see my accountant uh and get a tax write-off, 100% write-off, that's not the case because um there's a limit to the immediate deduction of depreciable asset, which is $20,000. You can have an immediate 100% tax deduction on that asset if it costs below $20,000.

Speaker 2 4:04

There's a key point.

Speaker 4:05

That's right. So don't go out there and spend a huge amount of money thinking that you can write it off straight away. Not the case.

Speaker 2 4:14

What's the smarter alternative?

Speaker 4:16

The smarter alternative is number one, if you actually need to purchase, for example, a laptop, and that's the need, go ahead, go do it as a business owner because it will cost below the $20,000. So you can um secure that immediate depreciable uh asset write-off. What it means is you're going to get, you know, 10% GST back, and then um you'll get the tax benefit of 25%, which is a company average company tax rate. So it will be a tax benefit of 35% all up, which means that that's your discount for buying that asset. That's pretty good when you actually need that asset, and you know, it's it's a it's a massive discount, really.

Speaker 2 5:06

And

Super Contributions As A Smarter Move

Speaker 2 5:07

for a lot of people, another smart alternative would be to, if they can, do their extra contributions to super.

Speaker 5:14

Yes, they can. So that to me, if you have a lot of cash in um the business, not not a lot of cash, but cash that you can reinvest, for example, you can reduce your business profit by paying extra super contributions to yourself and your spouse. It's like a salary sacrifice, you know, it's a one-off um before the end of the financial year through your company and claim tax deduction for. That is a good investment. And the return will be continuing. What I mean by that is you getting the um tax deduction for that super. So that's saving you, if you're um operating under a company, 25%. Um, once you contribute that super to your super fund, nominated super fund or um your self-managed, you only pay 15% tax on that. So already you're gaining 10% tax benefits. So you're saving 10% tax, that's winning. That's your return on investment on that cash. And then once it hit the Super Fund account, it'll be invested further, which means that you could look at a minimum return of anywhere between, you know, 4% to 15%, and it's compounding until you turn 60 and you can access your super balance. So it could be a game changer for you in terms of you know return on investment. And that that's an ongoing.

Speaker 2 6:50

Give us a list of the most missed deductions that people don't give thought to.

Speaker 6:55

Yeah, so

Deductions People Commonly Miss

Speaker 6:56

a lot of deductions that people missed are overnight travel allowance. So basically, if you are required to stay overnight somewhere for work, a lot of salespeople, a lot of real estate agents, for example, they have to travel to certain sites, buyer's agents, and um and you have to pay for your own accommodation, and you also have to pay for you know your travel. You may be reimbursed for, but you can look it up whether you can claim the overnight travel allowance rates. Um, the ATO has the fixed rates that you can claim. Ask your accountant to um you know, assess you whether or not you are eligible for that. Because a lot of people people who are employees, for example, they um their travel uh um interstate, they stay somewhere overnight, then um their accommodation might be paid for and um but may not be their meals. So they're still paying for that. So there are fixed travel allowance rates. The the ATO have that that rate published on the website, and it, you know, the amount is in accordance with your salary range as well. So that can be a game changer for you in terms of tax deduction because if you go away for three nights, there's um meals and incidentals that you can claim and you don't have to claim the accommodation because you get reimbursed for, for example. And on average, the meals and incidentals are around about eighty to eighty-five dollars a night. So that can boost your tax deduction for you. What about clothing? Yeah, that's a tricky one because um you can claim uniform, if it's um there's embroidery, yeah, and but it has to be an approved logo as well. And um and but the thing is if you're in trade, you can claim protective clothing and you can also claim the laundry, you know, the um there's uh an allowance rate that you can claim for um washing. And um a lot of the time people now working from home. So if you have a diary, and you should, and just you know, um diarize your working from home hours, that number of hours that you worked, and then provide that to your accountant so that they can calculate the um working from home rates for you.

Speaker 2 9:42

That's so good. Self-education.

Speaker 9:47

Yeah, okay. Self-education can be claimed. If you're actually studying whilst working in the industry, the trick is you must be working within that industry. So if you're studying Bachelor of Commerce, for example, and you're a trainee accountant, of course, you can claim the you know, the travel. Don't have textbooks anymore, but if you do buy textbooks, you can claim that. The travel from work to uni for your lecture and um tutorial sessions and parking, and even if you eat at the cafeteria, you can claim the cost of um the meals. And also if you pay for the course up front, you didn't need the HELP debt system or you didn't it's HECS. My in my years it was called HECS. If you pay for the course up front and you you work and study in that industry, that can also be claimed.

Speaker 2 10:47

What about tools and equipment?

Speaker 10:49

Tools and equipment, yeah. So with tools and equipment, you can claim for it, but if it's above three hundred dollars, you can't really secure immediate deduction. It will be depreciated. But the government's bringing in, you know, the minimum $1,000 claim, but that not yet law. So yeah, we you still need to have receipts. If it's over $300, typically it needs to be depreciated.

Speaker 2 11:18

What about our phone and internet? Is there a work portion we can claim on that?

Speaker 11:23

Yeah, that's a tricky one as well, because you need to be able to substantiate that you know I use 90% for work and or 50% for work. But if you keep good records, you definitely can claim the work portion of it.

Speaker 2 11:40

Professional costs, so your accountant, your insurances.

Speaker 11:44

Yeah.

Speaker 2 11:44

And also investments, you've got interest, property costs, they're all claimable. Yeah.

Donations And Prepaid Interest Strategy

Speaker 2 11:50

What about donations?

Speaker 11:51

Yeah, donations, um, as long as you have, you know, the receipts, anything above $2, yeah, be you definitely can claim. With donations, though, like if you are big donor, for example, your taxable income is $25,000 and you donated $30,000, you can't claim the whole lot because that's going to bring your taxable income into negative, you can't do that. Yeah. So it's forward either.

Speaker 2 12:22

Doing a large donation to a charity, does the company get all that back or only part of that back?

Speaker 12:27

Like you can claim the full tax deduction for it. But what when you're saying, you know, um you get all that back is you are eligible to claim the entire amount against other income. That's what you save, you know, in terms of tax, 25%.

Speaker 2 12:44

So it's not 100%. Not 100%.

Speaker 12:46

You're not going to get that $25,000 back, no. But and another thing that I want to point it out that a lot of people miss and don't didn't know that they can do this, is you can pre-pay interest on your investment loan. Okay. So for example, if you want to optimize your tax deduction and you have an investment loan and you have the cash to prepay the annual interest, you can contact your bank and just say, look, I want to prepay my interest for the next year. And you if you pay for, say, in this financial year, 2026 financial year, you have spare cash and you want to claim the deduction against your taxable income because you're a high income earner, you can contact your bank and just say, Look, I want to prepay your 2027 interest on loan. How can I do that? Once you've paid that, you can actually claim tax deduction in the 2026 financial year.

Speaker 2 13:48

That is a great little tip. Actually, many great little tips today. And I think we've broken that belief of I get it all back, I get it all back. You don't. You get the percentage that you're able to get back. What's our final wrap-up for today, Mai?

Speaker 14:02

The

The 1 July Test And Wrap

Speaker 14:03

final word for from me is that before you spend anything before the end of the financial year, ask yourself, would I do this on the 1st of July? If your goal is to reduce tax properly, don't do it emotionally. Don't, you know, get caught into that um spending frenzy because it's still your money. You want a return on investment rather than just spending it and trying to get tax deduction because you're not going to get that money back. Once it's gone, it's gone.

Speaker 2 14:37

Absolutely wonderful episode. And next week we're going to be looking at mortgages and what people think about that. But Mai Harris, thank you for joining us.

Speaker 14:45

Thank you, Lee.