For many people, their tax refund is treated like a mini lottery win. This tax time, consider putting your “gift” from the ATO to good use.
Perhaps it’s the modern world we find ourselves in that taxpayers look at their tax refund like it’s a fortuitous windfall gain. But if you look at your refund instead like it’s a chance to get on top of your fiscal responsibilities, its potential usefulness increases many times. When your refund arrives this season, consider putting it to work and silencing the part of you that wants to fritter it away on things that expire.
- Put it into your super
Remember the 70-year-old you gets better tax treatment. Unless you’re already contributing the maximum to your super through a salary sacrifice arrangement, there won’t be many other opportunities to do some tomorrow-proofing.
- Reduce or pay off your HELP debt
The ATO keeps track of your HELP debt balance and allows you to pay it off as you go. If your salary is over the HELP repayment threshold (currently $54,868) HELP repayments are levied from your before-tax income automatically, with the rate starting at 4% and rising as your pay increases. For now, if you pay your HELP debt upfront, the government reduces your debt by a further 10%, with a 5% reduction on offer for repayment contributions that are extra to the compulsory amounts. But this generosity runs out on January 1, 2017 — so this is the last tax refund that you can use to get this “free money” offer.
- Put it in a term deposit
This could be your chance to have some smart money — that is, money put away in a just-in-case account. Most Australian banks offer higher-interest savings accounts, and while some require minimum monthly deposits, you can’t go wrong letting your tax refund earn some extra returns for a short stretch.
- Pre-pay your recurring obligations
It’s a rare luxury to be able to pay any insurances, registrations and re-payment obligations before they roll around. Car registration payments commonly catch people off-guard, and paying extra off your mortgage will save interest on daily compounding rates. They don’t have to be left until last. Bite the bullet – defer those Manolos for now and buy them next quarter when your bills are fully taken care of.
- If you’ve got a small business or side venture, invest in it
Business tools and resources inevitably age. Why not use your tax refund to update old equipment or replace not-so-good assets with good ones? If you’re a small business, anything you buy for business use will likely be able to be written off, so you’ve got an extra to use your tax refund this way.
Having a better financial destiny is an age-old fight with discipline, but a tax refund is a chance to take some steps in the right direction.