Tax time is almost here. It’s a time when most of us cringe at the thought of going through receipts and invoices in preparation for lodging a tax return. Most people might think this is a pointless exercise in futility (not to mention a dirty chore), but the savvy people amongst us look at this time as a golden opportunity.
Sadly, people who don’t use a tax agent generally can expect less of a tax refund. For some, they think it’s not worth the time, effort or money to source help from a tax accountant. Why would they, when they think they’ll only get a few hundred bucks back? Right?
The answer might surprise you.
The average tax return, when lodged through a tax agent, is $2,754! That’s good money for most of us and a good amount of money to turn that into so much more.
You might turn your tax return into a saving account, pay off some bills or maybe take a holiday – and those would be all good things. But what we’re looking at is buying power.
Reduce Your Mortgage
Imagine you have a $400,000 loan over the course of 30 years. It’s not a hard stretch of the imagination. You could put that $2,754 right on your mortgage, which can save you $5,500 over the course of a loan at 3.99%.
Some people may even argue that $5,500 in the face of a $400,000 mortgage won’t make much difference, but if you consistently paid off your mortgage in a lump sum with your tax refund, compounded over ten years, you’d reduce your mortgage by $40,000! Now, that’s quite a different kettle of fish.
Reduce Your Credit Card
There are 13,554,211 credit cards in circulation in Australia. It takes the average Australian 6.5 months on average to pay off just $95.41 credit card debt. The average credit card debt is $4,200. 64% of Australian’s have paid late fees on their credit card. A staggering 52%* of people dig into their emergency funds to pay off their credit card debt – but what if you don’t have an emergency fund? Only half of Aussies could dig themselves out of credit card debt.
Tax-time could be your lucky break. It could take the average person making minimum repayments on an average credit card balance of $4,200, over 30 years and paying $10,000 in interest charges. If the same person where to use their tax refund of $2,754 to make a once off payment, they would halve their repayment time and save $7,000!
You’ve just turned $2,754 into a $7,000 saving – with money you didn’t even miss.
Save At EOFY
End of financial year if when many businesses offer sales. When buying on sales, it’s easy to save quite a lot of money, especially in big ticket items. Televisions, cars, couches all have good sales offered at this time of the year. If you could add $2,754 onto your savings, you’ve just bought yourself more potential savings.
Make sure you shop around so you know what’s on sale, when it’s on sale and if you actually have nabbed yourself a bargain. It pays to know your prices.
Make An Emergency Fund
In life things can and do go wrong. Accidents happen and they can be costly. Having an emergency fund to use when things do go wrong can cushion the financial impact and possibly avert a financial disaster. The last thing you need to do is pay for an emergency by using your credit card and putting yourself in deeper debt. Pop your $2,754 into a separate fund ready to use when you need it.
Did you know you can make extra payments into your super fund? Over the past 28 years, growth funds have returned 8.1% on average and the CPI has averaged 2.4% per year, giving a return of 5.7%.
Over a period of 30 years, if you opted to put your $2,754 tax return returning 5.7% into your super fund as a concessional payment, you’d make a total savings of $193,065 to retire on. That’s absolutely nothing to sneeze about!**
Pro Tax Tip: Did you know you can claim not only the fee your tax accountant charges on your tax, but also all of your travel costs you incur to meet with your tax accountant during tax time and throughout the year? Not many professionals pay for themselves – but tax accountants do.
ITP The Income Tax Professionals have been helping Australians with their personal and business tax for 50 years! There’s not a lot they don’t know about tax. Maximise your tax return with an ITP Tax Accountant who will know all the claims you can make – and also how you can invest your tax refund and make more cash in the long run. Your money. Your pocket!
** moneysmart.gov.au calculator