Today is the last day of the 2015-16 financial year and tomorrow will mark the first day of the tax season. We thought it would be fitting to end our EOFY series with info on different ways to use your tax refund.
ASIC provide some great tips on what to do with a tax refund (and any other significant financial windfall such as an inheritance or redundancy payment)–pay off a debt, put it in a high interest savings account, contribute towards your super, invest it and even seek a financial advisor.
ASIC’s tips focus on reaping long term benefits. They have suggested paying off a debt, such as a credit card or mortgage as it will mean less interest and saving more money. They have also suggested a high interest savings account due to the compound interest that can be earned, contributing to super to increase the amount of money to live on in retirement and investing to make the money go further. They also suggested going to a financial advisor, however this was more for inheritance and redundancy payments. That being said if you really want to be smart with your tax refund, especially if you receive a significant amount, it wouldn’t hurt to see one.
ASIC also published an infographic detailing the average tax refund and what Australians spend their tax refund on, based on research from the ATO’s Annual Reports from 2013/2014 and 2014/15, as well as from a MoneySmart poll. The infographic can be viewed here.
Australian online accounting business, E-Lodge, have offered similar suggestions. Some of their suggestions included making a charity donation, using it to renovate the house or go on a holiday.
However you decide to use your tax refund don’t forget that the only way to reap any benefits from it is to lodge your tax return. Don’t forget!