LifestyleTax Information

Make the Best Use of Your Tax Refund

If you are a low-income earner, it is possible that you may have paid more money in taxes than you owed on your tax return. In addition, you may be eligible for certain tax offsets to reduce you overall tax burden.
Either way, you may be eligible for a tax refund after you file your income tax return with the ATO (Australian Taxation Office).

If this is the case, it is important that you have a plan in place before you officially receive your refund. This will eliminate the risk of impulse spending and help you use the money where it can benefit you the most. Although, it may be a few weeks or months before you receive your tax refund, it is never too early to start planning. Below is a look at several great ways to make the best use of your tax refund this year.

Pay Off Some of Your Debt
If you have outstanding debts that are accruing interest each month, it is a good idea to use some, or all, of your tax return to pay off this debt. This will reduce the total amount of interest you will have to pay and save you money over time. In addition, this will put more money back in your pocket each month, by not having to make monthly payments on this debt.

Put Some Money into Your Super Account
You may also want to consider adding some of your tax refund to your superannuation account. If you make less than $49,488, the Australian government will co-contribute 50 cents for every dollar you put into your super account, up to a maximum of $500. This means that if you deposit $500 out of your tax refund to your superannuation account, the government will co-contribute $250.

Set Up a Savings Account
If you do not already have an emergency savings account set up, now is the time to start one. You should consider placing at least some of your tax refund into a special savings account that you use only for emergencies. This will protect you and your family if an emergency, such as an illness, injury, or loss of job, were to occur. In addition, you may want to set up a special account like the AddsUp or Saver Plus program. Both programs have different rules, but you could be eligible for matching funds up to $500.

Take Some Education Classes
You may also want to use some of your tax refund to take some education classes to improve your skills, especially if you have recently lost your job or are worried about redundancy. Education is always a good investment that could help you obtain a higher paying job in the future.

Purchase Energy Efficient Appliances
If you have a home appliance that is not operating properly, or you know is taking up a lot of electricity to operate, you may want to consider using some of your money towards purchasing a new appliance, like a refrigerator, stove or air conditioning unit. However, you want to be certain to purchase an energy efficient appliance when replacing your old appliance. This will help to reduce your utility bills and save you money throughout the year.

Having a plan in place before your money comes in is the best way to ensure that you spend it wisely. It is all right to spend some of the money on yourself and your family. A good split is to spend 10 per cent on you and put 90 per cent towards one, or more, of the saving or investment ideas listed above.

Read the following article for more information on tips for managing lump sums of money efficiently.

Image by Grant Cochrane

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