Tax season is officially here. Although you might consider lodging your tax return a chore, the good news is there may be a silver lining. As of last year, the average refund hovered around $3,600. And with 84% of taxpayers expecting a refund, the odds are most likely in your favour. But, before you start making plans with your looming cashfall, here are some smarter ways to consider spending your tax return.
Pay off your credit card bills and loans
According to ASIC’s, almost a third of us who receive a return, will likely spend it on paying bills. While paying off debt isn’t as glamorous as a holiday, it’s a smart move. Start with higher interest debts like short-term loans and credit cards. If you’ve got multiple credit cards, pay off the card with the highest interest rate first. In the long run, paying off debts means you’ll pay less interest and save more money.
Start an emergency fund
Accidents are just that – accidental. When the unexpected hits, the last thing you want to be doing is maxing out a high-interest credit card. A rainy-day stash of cash can be a lifeline when life gets hard. Look out for an account offering high-interest, and if possible, add to your emergency fund regularly – you’ll be surprised how quickly it grows.
Superannuation top up
If you’re young, you’re probably not thinking about retirement. Life expectancy and the cost of living are on the rise, which means retirees looking to live it up will need a lot more cash. Boosting your superannuation early gives your savings more time to grow. Be aware that there are caps and tax implications so, talk to your accountant before making any additional contributions. Your future self will thank you for it.
Mortgage offset account
If you’ve got a mortgage, chances are you’re paying interest. A mortgage offset account is a savings account attached to your home loan which offsets the amount of interest you pay on your home loan. With an offset account, in the long run, you’ll end up paying less interest which means more money in your pocket.
Invest in shares
Before investing in anything, it pays to do research to make an informed decision. Depending on the amount you have to invest and how savvy you are, there are plenty of investment options available.
Do good and donate
If you’ve got your finances under control and your debts are manageable, you could consider donating your return to a good cause. The gift of giving can be a worthwhile investment, and aside from the philanthropic feels, all charitable donations are tax deductible.
Invest in yourself
If there’s a course you’ve had your eye on or a new hobby you’ve been wanting to try – investing in personal growth is always a good idea. Depending on the course and how it relates to your profession, it may be deductible in next year’s tax return.