10 Smart Ways to Use Your Tax Return

It’s that time of the year again, sending us scrambling for the last years’ documentation in order to claim the maximum amount on our tax returns. Most Australians are lucky enough to receive a refund at tax time, and rather than spending it on luxury items, clothes or holidays, we have come up with 10 smart ways of investing the funds with your future in mind.

Please note that the information in this article is of a general nature and does not constitute personal financial advice.

1. Pay off high interest debt. Credit cards and other forms of unsecured finance can attract interest rates of more than 20% – that’s an extra $1,000 per year on a loan of just $5,000! You can save immediately on interest in the coming year by paying down the balance on your credit cards or personal loans.
2. Invest in a high interest savings account. High interest savings accounts are available with some major banks and online financial institutions. Do your research to ensure that you can access the funds as required, then put away your tax refund into a high interest account for a rainy day.

3. Make additional contributions to your superfund. Additional superfund contributions have a snowball effect – investing your tax refund of just $1,500 this year could give you tens of thousands more in your superfund when it comes time to retire.

4. Add to savings for a home deposit. A cash boost into your home deposit savings account can be a great motivator to keep you on track with your home ownership goals.

5. Make home improvements. Whilst your tax refund is probably not enough to completely renovate your home, it could be used towards minor improvements and increase the value of your property. You may consider taking a small loan or increasing your mortgage if you are considering major works.

6. Refinance your mortgage. Whilst refinancing your mortgage may save you a significant amount of money over time, up-front costs (eg. government registration of mortgage fees) can be a deterrent for many. Speak with a refinance specialist to determine whether refinancing your home loan today could save you money over time.

7. Start an investment fund. What better time to start your investment fund than when you’ve just been refunded a lump sum by the government? There are so many different investment options that we highly advise speaking with an expert before diving in.

8. Invest in your career. Career related training can lead to a better job or higher salary in future. What’s more, in certain cases the investment can be claimed as a deduction in next year’s tax return.

10. Start a business. Most small businesses require some form of investment to get off the ground, from just a simple website to investing in stock and equipment. Your tax refund could be used as the base for this investment, and you may wish to obtain extra business finance to get up and running quickly.
11. Donate to charity. Whilst it’s not a solid investment in your own future, a charity donation is a great way to use your tax return and may truly help a cause you believe in. Donations to registered NGOs up to a certain limit may be deductible the following year.

At Your Finance Adviser, we can help ensure your tax refund works for you through home loans, refinancing and small personal loans. Speak with an adviser to see how we can turn your tax refund into something bigger.