Maximise your tax return this financial year
June 2, 2011
There's less than a month until the end of the 2011 financial year and come tax time many Australians may receive an unexpected windfall, which if invested correctly could translate into significant financial gain.
Last financial year, the Australian Taxation Office (ATO) received around 10.4 million tax returns by the close of the lodgement period and had issued more than $21.7 billion in refunds by November (or around $2000 per working Australian on average).
So if you're one of the lucky ones to receive a tax refund this year, then you'll benefit from considering your investment options in advance. Here are our top tips to help you turn a small sum into big savings.
- Firstly, clear debt.
- Mortgage offset.
- Consider a high-interest savings account.
- Or think about a term deposit account.
The way you should invest your money will obviously depend on your life stage, personal circumstances and whether you have outstanding debt. And if you fall into the latter bracket and have debt owing on a personal loan or credit card, then you'll benefit from using your tax return to pay down this debt.
If you have a mortgage, consider establishing an offset account and deposit your return there. A mortgage offset account is a transaction account linked to your home loan and the money saved there is offset against the balance of your loan. So by depositing your annual tax return in this account you'll be able to save hundreds of dollars in interest, if not more, and may chop years off your home loan.
A good investment strategy, for those who are debt-free, would be to invest in a high-interest savings account. One of the top online savings accounts at RateCity is UBank's USaver account at 6.51 percent per annum. Deposit $2000 into this account and $200 for each month following, you'll earn around $200 in interest after 12 months, assuming the rate of 6.51 percent remains the same.
Alternatively, depositing your tax return into a high interest term deposit account isn't a bad investment either. Currently, one of RateCity's top three-year term deposit accounts with RaboDirect offers a rate of 6.75 percent for a balance of $2000. With this account you'll have earned around $405 in interest at maturity. Alternatively, for an exclusive live quote on your deposit, try out RateCity’s new term deposit portal.
Fools rush in
If it's a substantial amount of money that you're claiming at tax time, then don't make any rushed decisions about how to spend or invest the sum. Rather, set yourself a financial roadmap and think about how to use the money to build yourself a more secure future, not change your material surroundings. Comparing financial products online is a good way to get to know the market before you invest. Or if in doubt seek advice, particularly if it's a significant sum.
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