Making the most out of your tax refund

Making the most out of your tax refund

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What would you do if you suddenly found a couple of grand sitting in your bank account? According to estimates, a number of taxpayers are about to enjoy that sort of windfall. The average expected tax refund this year is about $2,000 – that’s not a bad little chunk of change. But what should you do with it?

I’m terrible at saving money in the conventional sense. Putting aside a portion of my pay packet each week, with a goal in mind, just isn’t for me. So when I was dreaming of an overseas adventure a few years back, I wrote off the idea as too hard.

And then I did my tax. I got a massive refund and suddenly my dream could become a reality. I booked my trip, packed my bags and took off to Vietnam for two weeks. It was incredible.

This year, if I’m fortunate enough to get a decent return, I think I’ll do something fairly boring. I reckon I’ll save the money – well, most of it anyway – and perhaps put it towards my next property investment.

It seems I’m not alone. API ran a web poll recently that asked what you’d do with your refund this year. An impressive 41 per cent also plan to put any money they get towards an investment.

According to research conducted by Bank West, almost three-quarters of Australians who expect they’ll get some tax back this year have already planned to put it in the bank or pay off non-deductible debt

I guess we’re a more responsible bunch than we’re usually given credit for! According to the bank’s Taxing Time Report, only 15 per cent of people expecting a tax refund this year plan to blow it on something exciting. Similarly, API’s web poll found only a tiny five per cent would put it towards a holiday, car or other desired material purchase.

Of those keen to use their refund to reduce personal debt, Bank West’s report found two-thirds would pay down their credit card as a priority. About 34 per cent will pay it off their mortgage, the report found.

If none of those ideas jump out at you but you’re also not keen to blow your windfall, there are some other options you might like to explore.

Get a face-lift

Not your face – your property’s. A couple of thousand dollars could be enough to breathe new life into a property, whether it’s your principal place of residence or an investment. A lick of paint, some new finishes, replacement kitchen bench tops, a revitalised garden… even a small improvement can boost the home’s value.

Offset your interest

Depending on how much money you get back, it could be worth exploring the option of putting it in an offset account against your mortgage interest. Chat to a financial expert or broker – they’ll be able to crunch the numbers for you.

Finally start that rainy day account

If you’re like me, there are a couple of times each year when something expensive happens and there’s a mad scramble to find enough cash to cover it. Twice now, it’s been a dying hot water system – both times, in the middle of winter. It’s a boring idea, but what about starting an emergency fund for these types of surprises? It might be worth it later.

What do you plan to do with your refund? Have you got any better ideas than those above?

Shannon Molloy is the deputy editor of Australian Property Investor magazine www.apimagazine.com.au

 

One Response

  1. In countries like Australia these Self managed super funds are very popular owing to the fact that people here age very quickly. The Australian Taxation Office encourages these funds to help the people have an easy way after their retirement. The fund ensures that your future assets are safeguarded well. If you will be getting pension based on account, your super fund will help you here too.