It might be tempting to blow your tax return on an indulgent retail purchase, but if you are smart about how you spend it, you will thank yourself later.
Blogger: Peter Gianoli, general manager, Investor Assist
As we approach the new financial year, many Australians are eagerly anticipating the arrival of their tax returns.
The funny thing is, most people consider their tax return large enough to spoil themselves with a new TV or a holiday, but too small to contribute towards something really significant like an investment property, because they don’t know how to invest tax returns. Many people don’t even think about investing with their tax returns. Sure, if your tax return is a few hundred dollars or even a couple of thousand dollars, it will not be enough to purchase a new property straight away. But saving those taxes instead of spending them can be your first step towards saving for a home deposit.
Combine this initial saving with a few minor changes in your daily life and you will be amazed how quickly your deposit can grow, proving how easy it is to invest tax returns to achieve financial gain. Just by cutting out a coffee a day, a few takeaway dinners each week and that expensive pair of shoes you don’t really need, you could save up to an extra $1,000 a month. It might sound surprising, but it’s possible for strong property investment tax return outcomes to occur.
How to use your tax return for investment
Yes, it will take you a while to save a 20 per cent deposit with the return on your taxes, but if you are happy to put down less deposit and pay Lenders Mortgage Insurance, then your dream of owning an investment property could become a reality much quicker than you think.
Alternatively, if you already have a deposit saved, any extra funds will help you to afford a better house or perhaps a comparable house in a better location. Or if you have equity in an existing property, your tax return might be that little bonus you need to inspire you to look at growing your portfolio. Either way, your tax return outcome could yield promising results for your investment portfolio.
If the process is managed correctly and with the right advice, you might be surprised to learn how easy it is to invest tax returns. To put it another way, you could own another investment property for as little as the cost of a cup of coffee a day. Sounds pretty tempting, doesn’t it?
Spend your tax return wisely
So before you bank your tax return and blow it on a few household bills or some new clothes (which will do little to further your overall position), take the time to stop and think about the best possible use for every spare dollar you have, and consider how to invest your tax return. Property investment tax return outcomes can be great.
Sure, a new pair of shoes or a holiday would give you short-term enjoyment and satisfaction, but nothing of value in the longer term. Investors in property need just a little more motivation and discipline, and saving your tax return could be the first step towards owning a new investment property.