Submitting your tax return might seem like a chore, but for many Australian taxpayers, it could mean a substantial tax refund.
There are smart ways to use that refund to help secure your financial situation. Here are some ideas to get you thinking about how you could spend or invest that refund.
1. Pay off debt
Australian Bureau of Statistics data shows that a large percentage of Australian households hold some form of debt. It might be a personal loan, credit card debt or a mortgage (or a combination of all).
More than a quarter of this percentage had total debt that was 3 or more times their annualised disposable income.
Using your tax refund to pay off even some of your debts can help you manage your money effectively.
2. Top up your savings
If you’re unsure what to do straight away with any windfall, putting your tax refund into a savings account until you do decide can be a smart move.
Some accounts give you bonus interest for the first few months, which will top up that initial amount that the tax office sent you. You can access your money once you’ve decided how you’d like to spend it.
A term deposit can be another practical place to park your cash. Because you won’t be able to access it for a set amount of time, the temptation to spend it straight away is removed, but in the meantime it can be gaining some good interest while you decide what you want to use it for.
3. Top up your superannuation
You may increase your super by adding a personal contribution either to your own super fund or to your spouse’s fund.
This is money that is in addition to any compulsory super contributions your employer makes on your behalf or anything you add through any salary sacrifice arrangement you may have.
Making after-tax contributions is a simple way to add to your super, and if you can spare the money, you can really boost your superannuation savings.
Please note caps apply to contributions made to your super in any tax year. These caps can depend on your age and whether you contribute before or after tax so to make sure you don't exceed these caps. Before making any decisions about your super (including additional contributions), you should seek independent professional financial and tax advice.
Find out more information from the ATO.
4. Invest in the sharemarket
Stocks can be a valuable part of your investment portfolio – they can help you build savings and generate income, which can reduce the impact of inflation. But remember, all investments involve some risk, and shares are no different.
There are ways to diversify and help mitigate some of the risk from market volatility. One way is through Exchange traded funds (ETFs). Whilst a share is an investment in just one company, an ETF represents investment in a whole selection of companies and assets – think of it like a basket of shares.
5. Add value to your home
Renovating can add value to your property as well as make your house or apartment feel more like a home. Just make sure you check for any local council guidelines regulations before you start renovating.
Be aware, too, that just like any other investment, property markets aren’t always guaranteed to rise. Overcapitalising when renovating or focusing on the wrong areas can be easy mistakes to make.
Stick to a budget and don’t try to do too much too quickly with only a limited amount of funds. Even painting just one room can freshen things up for the new financial year.