Money hack: Earn a better return on your tax return
Instead of going on a shopping spree, here are four ways to get a better return on your tax return this EOFY.
Your tax return often feels like free money. It's not. In fact, it's actually costing you money. I've written before about why you shouldn't want to receive a tax refund. The main reason being that it was your money all along, and the ATO has borrowed it for an entire year without paying any interest on the loan. That's a pretty bad investment when you think about it. With this in mind, a shopping spree sounds less enticing.
Instead of blowing your tax return in a day, here are four ways to grow your refund so it's even bigger in 12 months time. And don't worry if your tax return is on the small side; these options allow you to invest from as little as just $1.
Invest in property
Your tax return is most likely nowhere near the value of a house deposit, but this doesn't mean you can't use it to invest in property. With BRICKX you can invest in Australian residential property for as low as $100. The platform enables fractional property investment, allowing you to buy a smaller percentage (or, some bricks!) of a property. Each of the properties BRICKX buys is split into 10,000 bricks and sold to investors, like you. You'll then also earn a percentage of the rental yield, depending on how many bricks you own.
If your tax return is only a few hundred dollars, it can be difficult to invest in the share market. For example, you need at least $500 to trade on the ASX. However, with new micro-investment platform Spaceship Voyager you can start investing in local and international stocks from just $1. Just select from two investment portfolios and Spaceship will put your money to work in the stock market. Plus, balances below $5,000 don't attract any fees, making this a great option for your tax return.
High interest savings account
It may seem obvious, but putting your tax return in a high interest savings account is possibly the easiest and safest way to use your tax return to generate a return. Opt for one with a competitive interest rate, like the ME Online Savings Account which currently offers 2.85% interest, or the ING Savings Maximiser which currently offers 2.80% interest. Before you open any savings account, make sure you check the account conditions first.
If you're a bit of an impulse shopper and know that you'll be tempted to withdraw your tax return and hit the shops, a term deposit could be a good option. Term deposits lock your money away for a set period of time, making them a great set-and-forget savings tool. You can open a term deposit from as little as $1,000, and the longer you lock your money away, the more interest you'll earn.
finder money hacks is a bi-weekly round-up of the latest tips and tricks to improve your finances. Check back every Wednesday and Saturday for new hacks.
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