We’re often asked the best ways to use your tax refund – so we’ve collated a quick list of tips and ideas!
The best ways to use your tax refund to get ahead
1. Pay off your debts
One of the best ways to use your tax refund is to pay off any bills or cre
dit cards. While the suggestion may not be the most popular, debt can add up in the long run. If you owe any money, it’s wiser to pay off these bills then to keep them in your savings account. Contributing extra money to any debt can be a positive and useful way of getting ahead.
2. Voluntary Super Contribution
While superannuation can be a little boring, contributing extra to your super fund can be one of the best investments you make. Not only is your superannuation taxed at the low tax rate of 15%; you may also qualify for the government co-contribution of up to $500 per year – free money added to your savings. Then add the compound interest your super earns and you’ve got a healthy head-start for a happy, early retirement.
If you’ve got a HELP debt, you can make a voluntary repayment against it. As an added bonus, the government will take an extra 10% of your voluntary payment off your remaining debt as well! This is another way our Government will give you free money! After January 2012 this discount drops to 5%. Also, if you’ve got kids at school and receive Family Tax Benefit Part A, then think about buying them that new computer or text book and receive 50% back by taking advantage of the Education Tax Refund.
4. Term Deposit
If you want to make some money for nothing, don’t leave your refund sitting in an everyday bank account. Move your money into a high-interest term deposit or high-interest savings account to maximise the money you earn. You can compare term deposits and bank accounts online using tools like these*:
Note: Be careful about advertised ‘bonus interest rates’. Some banks offer very high rates for very short periods, then your rate drops to a lower rate once you’ve forgotten about it. Better to get a good rate that will carry you forward.
*Etax Accountants has no relationship with these websites and there are many others like these – do your research and read the banks’ information carefully.
5. Plan for large bills
At one time or another during the year it seems as though all of our bills arrive at the same time. Instead of being unprepared and putting some of these bills onto your credit card, start planning now. Set aside a slice of your tax refund for that rates notice, car registration or insurance payment. This makes paying your bills less stressful, and it puts you ahead financially because you won’t need to create new debts just to pay your bills.
The above article is general information only. You should discuss your personal situation with a licensed financial planner.