System Data taking up a large amount of storage is a common question on Mac.
There is no single setting that simply “clears” System Data because this category can include a variety of files, including caches, logs, temporary files, and APFS snapshots.
If you want the most comprehensive solution, back up first, erase the Mac, and reinstall macOS.
For Apple silicon Macs, use Erase All Content and Settings.
This removes your data, settings, and applications while leaving the currently installed version of macOS in place.
Make a current Time Machine backup before erasing anything. Apple: Back up your Mac with Time Machine
Afterward, use Migration Assistant to transfer your user account rather than the entire old system, and reinstall only the applications you actually need.
If you do not want to erase the Mac, first determine what is actually consuming the space. DaisyDisk can provide a clearer view of storage usage, and Apple documents how to view APFS snapshots in Disk Utility.
The following Apple Community discussions document additional approaches. Results can vary depending on what is responsible for the storage usage:
Also consider moving large personal files—particularly Photos, videos, music, and other files you control—to an external SSD as my colleague @den.thed has suggested
This is often a more appropriate way to free internal storage than attempting to delete files that macOS manages as System Data.