Getting a big tax return? 3 reasons why that’s actually terrible
Getting a lot of money back from your tax return isn't as great as it seems.
Did you get a big tax return this year, or are you expecting one?
Everyone always wants a big tax return as it feels like free money, but getting a large amount back in tax isn't actually as good as it seems.
Don't get me wrong, it's certainly nice to get a bit of cash back. Especially if you weren't expecting it.
But if you're not expecting much back this year, don't feel like you're missing out.
Here are 3 reasons why getting a large tax return is actually a bad thing.
1. You've been paying too much tax
If you get a large amount of money back in your tax return, it's likely because you've been paying too much tax throughout the year.
This means the system hasn't been working for you quite as it should.
If you don't get anything back in your tax return, you can be happy knowing that you haven't paid more tax than you're required to throughout the year.
Remember, you're not really meant to get a tax return.
2. You've been loaning your money, with no return
If you've been paying more tax than you need to, this means you've basically been lending your money to the ATO all year.
And now the government is simply returing your hard-earned money back to you, in the form of a tax return.
However, it's pretty much the worst loan ever because you haven't gained anything from lending your money.
If you choose to lend your money to a bank for 12 months (for example via a term deposit), the bank will pay you around 4% p.a. interest.
The ATO does no such thing!
3. You could have been making money on the money
Finally, that money you get back in tax can feel like free money.
But it's actually costing you in the formed of missed opportunity.
If you had control of that money throughout the year (instead of it sitting with the ATO), you could invest it so it is actively making you money.
It could have been sitting in a high interest savings account earning up to 5% p.a., invested in the share market or added to your super fund.
Already got your tax return?
Put that money to work in a high interest savings account.
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