Tax season is one of the most stressful times of the year, but it can come with a nice silver lining – a healthy tax refund. If you’ve used our handy tax return calculator and figured out you have a decent chunk of change coming your way, the next big question is what to do with it. Before you splurge all of your hard-earned cash, remember it is exactly that – hard-earned.
While receiving a lump sum can be exciting, what you’re actually dealing with is money that should have been yours all along. For many of us, a tax refund is the biggest lump sum we receive in a single transaction in a year. But you shouldn’t treat it as “free money.” Every cent you get back is money you worked to earn. So, consider some of the following strategies to honour the work you’ve put in and move your finances one step ahead.
How to Spend Your Tax Refund Wisely
1. Pay Off Your Debts
If you have debts that are accumulating interest, such as credit card debt or bank loans, putting your refund towards paying off the plastic is a great investment. You might be dreaming of an island getaway or wardrobe refresh. But if you can resist those impulses and instead knock out some interest payments, you’ll be setting yourself up for a more stress-free future.
2. Top Up Your Super
According to the government, those who want to retire ‘comfortably’ should focus on saving around half a million dollars for their retirement. Boosting your super early-on means there’s more time for your super fund to grow. Putting your tax refund into super might not be the most exciting moment, but your future self will thank you!
3. Save or Invest ItÂ
As a general rule, we don’t miss what we don’t see. Why not set up a portion of your refund to go straight into a long-term savings account? Whether you’re saving for your first home, an investment property, or laser eye surgery, your tax refund can help you make serious progress.
Likewise, investing your tax refund can be an excellent financial move. From Exchange Traded Funds (ETFs) to index funds, you have quite a few investment options. If you don’t already have an investment account, consider seeking advice from a reputable financial planning service.
4. Start an Emergency Fund
A well-stocked emergency fund is a critical asset for all Australians. Circumstances can change pretty quickly, but a rainy day fund can help you weather even the most unexpected storms. Given the current state of the job market, it’s especially important to start building up enough cash to last you at least a month or two. This will give you a critical level of financial security if you find yourself between jobs for longer than expected.
5. Climb the Career LadderÂ
If you’ve been eying off a promotion at work, or you’re looking for a higher-paying career, why not spend the money on developing new skills, or refining old ones? Start a new course, stock up your bookshelf, or seek out professional development opportunities within your organisation. As an added bonus, anything you spend on education that lands you a promotion or is otherwise directly related to your work is generally tax-deductible. So you can look forward to a healthy refund next year, too!
Want to learn more about self-education expenses and what you can and can’t claim? Visit our complete guide to education expenses.
6. Book a Holiday
Yep, we saved the best until last. While it’s not going to have immediate financial benefits, a little time away could be just the break you need to recharge, relax, and clear your head. Returning to work after a break could boost your productivity, increase your job satisfaction, and put you in a better frame of mind to tackle those tricky work problems you’ve been stressing about.
DOWNLOAD THIS ARTICLE: 6 smart ways to spend your tax refund
Want to Maximise the Money You Have to Spend?
If you want to spend your tax refund wisely, your first and more important step is to make sure you get the biggest refund possible. This is where ITP’s talented accountants shine. We set a clear objective for all of our tax agents: Get as much money back for every client as you can. Add to this our affordable fees (which you can claim back on your next tax return), and you’ve got a recipe for your healthiest tax refund yet. Once you’re signed on with us, we also offer free tax advice all throughout the year. So you can ensure you never miss a potential deduction or tax credit. Contact us today to book in an appointment with one of our friendly local tax accountants, and get set for your easiest and most profitable tax season yet.