Use tax time to grow your wealth investing in property and shares

The tax refund boost of up to $1080 has the potential to increase the wealth of millions of Australians. Here’s how to do it.

A tax refund boost of up to $1080 this year has the potential to multiply the wealth of millions of Australians.

Whether it’s 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 individuals after they file their tax returns.

Finance specialist Vanessa Stoykov said putting tax refunds of $2000-$5000 directly into an investment portfolio could turn them 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.”

Finance specialist Vanessa Stoykov says tax refunds can grow into impressive wealth.

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.

Doing your own tax is easier than you think

But Ms Stoykov said Australians needed to be more patient with their money.

“People too often are searching for instant gratification, which is why they splash their tax returns on new clothes or a holiday, but this desire for gratification works directly against them creating a long-term investment,” she said.

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.

Certified financial planner Patrick Canion

Emma Slape, general manager of Turner Real Estate

“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-financial-year statement, which should capture income and expenses,” she said.

“Have you paid for anything that wasn’t paid for by the agency?”

Ms Slape said investors could chat with their accountant about potential further investments.

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.

“In newer or larger properties, the depreciation claim can exceed $10,000 per year — which is a tax deduction you can claim against your personal income, without having to outlay any expense.”

Depreciation reports usually cost $600-$700 but they are also tax-deductible.

@keanemoney

DON’T FORGET THESE DEDUCTIONS

• Interest expenses for property and share investors

• Insurance, repairs and maintenance, property agent fees

• Depreciation for properties using a tax-deductible depreciation report from a quantity surveyor

• Council rates, land tax and other levies