It looks like we’re a nation of savers, with one in three Australians planning to save their tax refund. It’s a smart move, but there are plenty of other ways to supersize the value from your tax refund.
Comparison site Finder says eight out of ten Australians are expecting a tax refund, and with the Tax Office handing back $28 billion in personal refunds last year alone, it’s fair to say plenty of workers will pocket a tidy windfall.
The big questions is what do you do with your refund?
According to Finder research, 31% of us will save the cash, and 10% will use it to pay a bit extra off their mortgage.
These are both sensible strategies. However, with interest rates so low on deposit accounts and home loans, there are other ways to use a tax refund to enjoy more bang for your buck.
If you’re carrying a high interest credit card debt, it can be worth using your refund to pay down the balance. Some cards charge rates of 20%-plus, so you’ll save far on interest more than by paying down your home loan. Turbo-charge the savings by shopping around for a low rate card.
Another option is to boost your super with a personal after-tax contribution. Or, if you’re in a relationship, consider making a contribution to your other half’s super fund. You could be eligible for the 18% spouse super tax offset worth up to $540.
Since 1 July the spouse super offset is available if your spouse or partner earns up to $37,000 annually (phasing out altogether at $40,000). That’s a big increase on last year’s income threshold of $13,800, and it could be an easy way to boost your combined retirement savings and get a decent amount of tax back next year.
Your tax refund can also be a source of cash to take out income protection insurance. This type of cover provides replacement income usually worth around 75% of your current wage or salary if you can’t work due to illness or injury. The beauty here is that the premiums are normally tax deductible, meaning you could enjoy a healthy refund again in 2018.
Or, put your refund to work by kick-starting an investment portfolio. If you’re not confident investing directly, think about a managed investment fund. There’s plenty choose from including funds that focus on Australian shares, property, global shares, or a mix of investments across the spectrum. It’s possible to get started with as little as $1,500, which may be less than your tax refund. Then build on your portfolio with a regular investment plan.
Your financial adviser can offer more ideas on ways to use the tax man’s cheque, and it’s worth setting a date to have a chat. Putting your tax refund to work each year can be a low-fuss way to steadily strengthen your financial security.