Use tax time to grow wealth
A TAX refund boost of up to $1080 this year has the potential to multiply the wealth of millions of Australians.
Whether through shares, property or other assets, maximising tax time is one of the keys to getting richer, according to investment advisers.
The average tax refund of around $2500 will be boosted by hundreds more dollars in government tax cuts going to more than 10 million people after they file their tax returns.
Finance specialist Vanessa Stoykov said putting tax refunds of $2000$5000 directly into an investment portfolio could turn into $20,000 within a few years.
“Start now and use your tax return as a base,” she said. “Money makes money, and letting your money work for you over time is much better than a pair of shoes now.”
Delivering tax cuts through a lump sum tax refund will inject billions of extra dollars into the economy before Christmas and reduce the risk that people fritter away the money.
Certified financial planner Patrick Canion said investors should use tax time to review and rebalance their portfolios.
“Make sure you are still properly diversified,” he said.
“Paradoxically, this might mean selling down some shares that have done well over the past year – and hence, you are now overexposed to – and buying investments that have underperformed.”
Mr Canion said tax refunds should be used to buy more growth assets or get rid of debt, and investors should avoid the trap of having poor records from the past financial year.
“This can mean missed deductions or worse, not being able to verify expenses as being deductible,” he said.
“Ask your accountant for a checklist of what you should claim for, and review your record keeping process – is there an app that you can use to easily track things throughout the year?”
Turner Real Estate general manager Emma Slape said property investors should make sure all deductions were claimed.
“Ensure your property manager issues you with an end-of-financialyear statement, which should capture income and expenses,” she said.
“Have you paid for anything that wasn’t paid for by the agency?”
Your Investment Property editor Sarah Megginson said her number one tip for landlords was to get a depreciation report “even if the property is older”.
“Depreciation allows you to claim the decline in value of your property over time, which generally amounts to a few thousand dollars each year,” she said.
Depreciation reports usually cost $600-$700 but they are also tax-deductible.
Don’t forget these deductions