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How to turn your tax return into $16,414

Nearly half of Aussie investors are planning to invest their tax returns.

Lewis Kidson. Australian money and calculator. Tax return concept.
Lewis Kidson is planning to invest the majority of his tax return this year. (Source: Supplied/Getty)

There are days to go until tax time, and some Aussies are already planning how they will spend their refunds.

Lewis Kidson is expecting to get a tax return of between $3,000 and $5,000 this year and is planning to invest the majority of it.

“I only had my first go at buying stocks a month or two ago. I did quite a bit of research because I was pretty keen to invest it as ethically as possible,” Kidson told Yahoo Finance.

The Sydney resident is planning to invest between 60 and 80 per cent of his tax return in ethical ETFs, and use the remainder to get his car serviced.

“Being so new to it, ETFs seem like the simpler approach to someone who is just starting out. It would be cool to get a better grasp on buying individual stocks later on but, for now, that’s probably where I’ll start out.”

Kidson isn’t the only Aussie planning to invest. New research from Sharesies found nearly half of existing investors (46 per cent) getting a tax refund were looking to invest it.

Around 47 per cent plan to put their tax return into their savings, while 30 per cent will use it to help cover their everyday expenses. A further 11 per cent said they were going to splurge on a big-ticket item.

$2,900 cash injection

Sharesies Australia country manager Brendan Doggett said many taxpayers were likely to receive a healthy lump sum, with the average return being around $2,900.

“With the markets subdued at the moment, investing the total at this point could help to significantly boost your portfolio by buying up shares at a lower price than when the markets are higher,” Doggett told Yahoo Finance.

“By doing so, at the end of the 2024 tax year, that sum will have grown to $3,163. But looking even further ahead to 10 years down the line, thanks to compounding interest you would be sitting on $6,900 instead.”

Brendan Doggett, Sharesies.
Brendan Doggett from Sharesies said Aussies could invest their tax return and kickstart a new habit. (Source: Supplied)

Turn your tax return into $16,414

If your budget allowed, Doggett said you could use your initial tax return investment as an opportunity to kickstart a new habit.

“If you can stash away just $50 more every month after the initial investment, you’d be looking at a healthy $16,414 10 years down the line,” he said.

“This regular $50 investment is an example of dollar-cost averaging, where you invest the same amount in a particular investment regardless of the share price.

“This will help to average out your cost per share over time so that when the market does rise again, you’ll feel confident to continue buying shares as part of your long-term investment plan.”

Sharesies said its calculations were based on an average 8.7 per cent return as per ASX data from 2012-2022.

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