How to Use Your Tax Refund

Do you dread the arrival of tax season? It doesn't have to be as horrible as you think it is. Why not make the most out of your tax refund this year and put it to good use? In the next article, we will discuss some of the most effective strategies for putting your tax return to use in Australia. We are able to accommodate your needs, regardless of whether you want to go on an adventure, improve the quality of your life, or put money away for the future. Your money will be refunded, so you may take it easy for the time being.

Do you happen to be one of the fortunate individuals who gets a tax return each year? If you find yourself in this position, you might be scratching your head about what to do with all of the extra cash. This is a guidance on how to make advantage of your tax refund that you received from Australia. ​

Despite the fact that everyone's circumstances are unique, there are a few general things you may do with your tax return, such as save it, invest it, or spend it. Your own financial status and the things you hope to accomplish with your money should guide how you decide to put your tax return money to use. Continue reading for additional details on each available choice. ​

Are you a taxpayer in Australia who is anticipating receiving a tax refund for the current year? If that's the case, you're probably thinking what the most beneficial method to spend it is. In the next blog post, we will offer some advice on how you can make the most of the money that you were given in the form of a tax refund.

Use Your Tax Refund Wisely This Year with These Ideas

This year, before you dash off to the stores to spend your tax refund, take some time to think about the ways in which your tax refund may have the most potential to affect your life and your finances.

We hear from a large number of Australians (and tax accountants) about the various ways in which they intend to spend their tax return. Let's look at a few of their suggestions, shall we? What should I do with the money that I get back from my taxes?

The following shrewd suggestions regarding money have the potential to assist you in becoming more financially secure.

Addition to the Super Contribution

According to projections provided by ASFA, a couple will require a lump amount of $640,000 and a single individual will require $545,000 in order to maintain a good lifestyle once they reach retirement age. (We'll assume here that you get some of your age pension.)

These are really large numbers when compared to the majority of us. Increasing your contributions to your superannuation account at an earlier stage gives your funds more time to accumulate.

Simply deposit your tax return into your superannuation fund by following the instructions provided by your superannuation fund or advisor; your "future self" will be grateful to you for doing so when you reach retirement age.

You can boost the amount of your retirement savings by making a personal contribution to either your own or your spouse's retirement account.

This money is in addition to any mandatory super contributions that are made on your behalf by your employer, as well as any contributions that you make through any salary sacrifice agreement that you might have.

Contributing money to your superannuation account after taxes has already been taken out is an easy method to add extra funds, and if you have the financial flexibility to do so, you can significantly increase the amount of money you have saved in your retirement account.

Please be aware that there are limits placed on the amount you can contribute to your retirement account during any given tax year. To ensure that you do not go over these limits, it is possible for them to be contingent upon factors such as your age and whether or not your contributions are made before or after taxes. You should consult with an independent and competent financial and tax professional before settling on any course of action concerning your retirement savings.

Purchase Work-related Equipment Now for over $300 to Maximise Your Tax Deduction for the Following Year

Making use of your tax refund could be an excellent alternative for you if you have been delaying the purchase of any expensive work-related things such as computers, tools, or equipment because of the cost involved.

You are required to depreciate, or write off, the cost of work-related items that are more than $300 over the "effective life" of the item. If you wait until the end of the year to purchase these products, the benefit that you receive on your subsequent tax return would be quite minimal. However, if you purchase the item in the middle of the year, between July and August, your depreciation computation will span a longer period of time, and as a result, you will be eligible for a larger deduction on your subsequent tax return. This can be made much easier for you with the assistance of your tax agent.

Your Children Should Have a Term Deposit with Your Tax Refund

You should set some of your annual tax refund aside in a savings account so that you will be able to pay for your children's upcoming expensive bills in the future. If you put your tax return into a long-term deposit or any other secure investment that earns interest over the long term, you'll have money set aside for your children's future college expenses or their first vehicle.

When your children are older, you will be able to provide them a significant advantage without placing a significant strain on your financial resources.

Pay Off Debt Owed On Credit Cards Or Loans

Do you feel as though you will never be able to pay off the debt on your credit cards or your personal loan?

Think about using your tax return towards paying off or reducing the balance on one of your credit cards. As soon as you pay off more of your principal debt, the amount of interest you have to pay will begin to decrease. After you have paid off all of your debts, you should start spending your money on things that you want rather than contributing to the profits of the bank by making credit card interest repayments.

According to data from the Australian Bureau of Statistics, a significant proportion of households in Australia are in some kind of financial obligation. It could be a debt from a credit card, a personal loan, or even a mortgage (or a combination of all).

More than a quarter of these individuals had total debts that were equal to or greater than three times the amount of annual disposable income they had.

If you use even a portion of your tax refund to pay off part or all of your bills, you will have a much easier time managing your money.

Your Mortgage Offset Account Should Receive Your Tax Refund

If you already have a mortgage, your bank or mortgage provider most likely gives you the opportunity to "mortgage offset" your payments.

To put it simply, a savings account is what a mortgage offset account is. However, rather than getting interest on your savings each month, the balance in your offset account will be reduced from the balance of your ongoing mortgage loan when determining the amount of interest that will be included in your monthly mortgage payment.

You will ultimately wind up paying less interest on your mortgage, which will result in you keeping more of the money you pay each month. You will be able to pay off your house loan sooner and spend less of your money on interest costs, all while maintaining a balance in your offset account that is available for use in the event of an unexpected expense.

Will I Want to Save My Tax Refund?

That is not an overstatement at all. It's not a pipe dream, especially if you get a head start. Let's look at a simple example:

Edward has reached the age of 25. His annual tax refund amounts to approximately two thousand dollars.

Edward began placing his tax refund money into a standard savings account in 2021. This was an account that he had opened specifically for the purpose of saving money and not spending it. He visited a number of financial institutions before settling on the one that offered the highest interest rate for the account. That will be done once a year by him to ensure that he continues to receive favourable interest rates from the banks. And very soon, he will move the money into a term deposit in order to earn a better interest rate while still maintaining access to the money in the event that there is an emergency.

Where You Should Not Invest Your Tax Refund and Why

Every month, Australians waste billions of dollars by looking at a website or pokie machine that eats away at their salary or their tax refund. In general, playing pokies is a surefire method to lose money in a short amount of time.

The Australians are the most avid gamblers in the world, and part of the reason for this is that we have encouraged the proliferation of gambling machines across our communities and have made it legal for people to play online. (Pokies and internet betting have been regulated or outright prohibited in many nations.) As a consequence of this, Australians lose over $24 billion each year, with more than half of this amount going directly into slot machines.

Pokie machine manufacturers combine technology and cognitive science to give the illusion that the gamer is winning or at least staying even, when in reality the player is losing money. It would appear that manufacturers of gambling machines are also working on new strategies to get people of younger ages to participate in gaming. Companies that offer betting online are likewise working very hard on developing new strategies and marketing strategies.

We recommend that if you want to give away your tax return, you donate it to a person who is in need or to a charity; this will make you feel happier than if you gave all of that money to a slot machine would have made you feel if you had done so.

The fact that gambling can also be thought of as a form of indirect taxes is an intriguing aspect of the activity. Gambling is permitted throughout Australia despite the high level of taxation that is levied on the activity. A sizeable portion of the money that is lost on bets around the country is funnelled back into the government's coffers. If you wager and end up losing your tax refund, it's the same as handing over a portion of that money to the ATO all over again.

Pay Off Your Loans In Addition To Credit Card Bills

According to a survey conducted by ASIC's MoneySmart programme, nearly one third of us who get a return will most likely use the money to pay our bills. Although paying off debt isn't as exciting as going on vacation, doing so is a wise financial move. Start by paying off the bills with the highest interest rates, such as those for short-term loans and credit cards. In the event that you have more than one credit card, you should prioritise paying off the card that carries the highest interest rate. In the long run, paying off your debts will result in lower interest payments and will allow you to save more money.

Start a Fund for Emergencies

Accidents are exactly that - accidental. When something unanticipated happens, the last thing you want to be doing is using a credit card to its maximum limit that has a hefty interest rate. When times are tough, having some cash set up for emergencies can be a real lifesaver. Keep an eye out for accounts that provide high interest rates, and if at all possible, make monthly contributions to your emergency fund; you'll be astonished at how rapidly it will grow.

Adding to One's Superannuation

If you're a young person, you probably haven't given much thought to when you'll stop working. However, because both the life expectancy and the cost of living are on the rise, retirees who want to continue living a comfortable lifestyle would need a significant amount more money. If you start contributing more to your retirement fund earlier, your funds will have more time to grow. Before making any further contributions, you should discuss the matter with your accountant because there are contribution limits and possible tax repercussions. Your better self in the future will be grateful to you for it.

Mortgage Offset Account

If you have a mortgage, there is a good probability that you are also paying interest on it. A mortgage offset account is a savings account that is tied to your house loan and reduces the amount of interest you pay on your home loan. This type of account is also known as a mortgage savings account. You will wind up paying less interest overall with an offset account, which means you will have more money in your pocket at the end of the day.

Invest In Shares

It is in your best interest to get as much information as possible before making any kind of investment. But regardless of the sum of money you have available to invest and the level of financial expertise you possess, there is a wide range of investment opportunities open to you.

Good Deeds and Giving

If you have your finances under control and your debts are manageable, you may want to give some of your tax refund to a charitable organisation if these conditions are met. Giving to charity may be a profitable investment, and in addition to the warm and fuzzy feelings you get from helping others in need, your contribution may qualify for a tax deduction.

Put Money Into Yourself

Putting money towards your own professional or personal development is never a bad idea, whether it's for a class you've been wanting to take or a new activity you've been thinking about trying out. It is possible that you will be able to deduct the cost of the course when you file your taxes for the following year. This will depend on the nature of the class and how it connects to your work.

Don't worry if you haven't submitted your tax return just yet; we're here to help you with that. No matter what industry you're in, we have the knowledge and experience to guide you through the intricacies of your specific tax responsibilities and provide the support and set-up you need. Your tax return will be double-checked by one of our tax specialists regardless of whether you choose to lodge it online or in-store to ensure that you are obtaining the greatest benefit possible from your tax return for 2018.

Reduce the Stress Caused by Your Debts as a Favour to Yourself

It is a fact of life for many of us, despite the fact that no one enjoys having to put their entire paycheck towards paying their obligations. It might be challenging to keep up with the ever-increasing debt at times.

Therefore, we strongly suggest putting that additional piece of cash from your tax refund towards relieving the strain of your debt.

Paying off debt is a smart move since it lowers a recurring expense, which makes more money available in your monthly budget.

It is a good idea to start with a higher rate of bad debt first - for example, your credit cards could be a smart place to start if you are having trouble deciding where to begin.

If you have multiple credit card debts to pay off, you may want to investigate the possibility of consolidating them onto a single credit card through the use of a balance transfer offer. This will allow you to pay off all of your credit card debts with a breathing space of several months free of interest charges.

Consider the Long Term And Increase Your Super

Investing your tax return in your retirement fund is another intelligent decision because it will assist in the growth of your savings for old age.

A recent study found that approximately 31% of households are concerned about their ability to maintain their current standard of life once they reach retirement age.

Even though the law mandates that your company contribute 9.5% of your wages to your chosen superannuation fund, you have the option to contribute even more money to your superannuation fund.

Because of the strength of returns that compound over time, the more money you put into your retirement fund today, the more you'll have when you retire.

If you are considering depositing your tax refund into your superannuation account, you should give some thought to how the recent tax changes that the government has made to superannuation may have an impact on you.

Protect Yourself From The Future And Set Aside Money For The Unexpected

Because you can't predict what challenges life will provide you with, we strongly advise you to put whatever money you receive from the government into an emergency savings account.

You should ideally have enough savings to cover at least six months' worth of spending. But even if you only have a tiny amount of cash stashed away, it can help you weather the unexpected occurrences or expenses that life throws your way.

It is usually helpful to have a few extra dollars set aside to support you in the event that anything unexpected happens, such as a bill from the hospital that is not covered by health insurance, a broken washing machine, or a costly car problem.

It is advisable to keep your emergency money in a savings account that is distinct from the account you use for your regular expenditures in order to avoid the temptation of continually drawing from your savings.

Keep Those Savings Safe

The very last piece of advice I have for making the most of your tax refund this year is to save, save, and save some more.

If you merely leave it in a transaction account, it makes it far too easy to use the money on things that aren't absolutely necessary, even if you don't mean to.

It is a smart move to seriously consider putting your tax refund into a separate savings account, or perhaps a term deposit if you want to be extra cautious.

You will start accruing interest and will be able to make significant progress towards achieving your savings objectives in this manner.

Increase Your Savings

Putting any unexpected money, such as money from a windfall or a tax refund, into savings while you mull over your options is a prudent thing to do if you aren't sure what to do with the money right immediately.

There are accounts that will provide you extra interest during the first few months that you have the account, which will add to the initial sum that was sent to you by the tax office. After that, you will be able to get access to your money as soon as you have made a decision regarding how you would like to spend it.

Another convenient option for putting your money to work is to put it into a term deposit. Because you won't be able to access it for a certain period of time, the temptation to spend it right immediately is eliminated; but, while you are deciding how you want to put it to use, it can earn some decent interest in the interim.

Obtain Some Stock for Your Portfolio.

Because the Australian Securities Exchange (ASX) is home to more than 2,000 different companies, you should be weary of investing all of your money in just a single stock. There are, however, strategies to diversify your share investments, which can help alleviate some of the risk that is associated with the volatility of the market.

Investing in exchange-traded funds, also known as ETFs, can provide you with greater diversification across multiple markets. ETFs are listed on a stock market, and investors can buy and sell units in an ETF much like shares of stock through a broker. This gives investors access to a certain region or country, as well as a particular investment theme (e.g. real estate).

ETFs give an entry option into markets that might otherwise be difficult to access and can provide diversification, transparency, and liquidity to help mitigate risk. This is especially helpful when markets are volatile.