Yahoo Finance 9 smart ways to spend your 2019 tax refund
The new financial year has finally arrived, and Aussies around the country are frantically filing their 2019 tax return to get hold of that much-anticipated refund.
Are you wondering what to do what your tax refund this year?
WAIT.
Before you rush off and blow it all on an extravagant holiday, hit up the casino or use it as a downpayment on something you can’t afford, there are some smart ways this chunk of money can help make you more financially comfortable.
Here are 9 things you should do instead;
#1 How to spend your tax refund: Spend it on something you need
Need some dental work, a winter coat or to fix your car?
Seeing as you need to take care of these essentials, it would be wise to use your tax refund to cover the cost you otherwise wouldn’t be able to pay.
#2 How to spend your tax refund: Start a new business
Have you always wanted to start a new venture but have been waiting for the extra cash to roll in?
Good news. You can use your tax refund to move in the right direction.
Now is a great time to turn your extra cash into income for years to come.
And the best part? You can get some more small business tax deductions next tax time as well.
#3 How to spend your tax refund: Top up your superannuation
The Association of Super Funds of Australia suggests about $25,000 would be enough for an individual, and $30,000 for a couple to live on “comfortably” for 20 years in retirement – which is the Age Pension plus $3,000-$5,000.
However, if you want a life in retirement where you can afford to eat out more often, or you want to have some holidays, the Centre for Independent Studies suggests need $40,000 per year in income.
To get to that level, you would need to be earning $15,000 to $20,000 from your super, in addition to the Age Pension.
To get that much over the course of a 20-25 year retirement, you’re probably looking at a little over $500,000 in your super balance at retirement.
Of course, if you retire with a $1 million nest egg, you can live on $100,000 a year for 10 years.
For most of us, those are big numbers, which means any opportunity to boost your super early-on means there’s more time for your super savings to grow.
And the simplest way to do this? Your tax refund.
#4 How to spend your tax refund: Pay off your debt
Do you have a credit card debt or a personal loan you seem to be paying off forever?
Etax recommends you consider using your tax refund to lower your credit card debt or pay it off.
“Your interest repayments will drop as soon as you lower your outstanding balance,” the online tax accountant points out.
And once you’re debt free, start using your money for you, rather than contributing to the bank’s profits by paying credit card interest repayments.
#5 How to spend your tax refund: Put the money in an offset account
If you’ve got a mortgage, your bank or mortgage provider probably offers a mortgage offset option, Etax said.
A mortgage offset account is basically a savings account but instead of receiving interest on your savings each month, your offset account balance is subtracted from your outstanding mortgage loan balance to calculate the interest component of your mortgage payment, Etax said.
This means you’ll end up paying less interest on your mortgage and therefore leaving more money in your pocket.
You can pay your home loan off quicker and pay less of your money in interest charges, while your offset account balance is still ready for you to use in an emergency.
#6 How to spend your tax refund: Donate to charity
When you’re tight on funds, donating to charity is usually the first thing to go.
So with some new money in your wallet, why not donate to a cause you believe in.
And the best part? Not only are you doing your bit for the cause, you can also claim the donation on your tax return form for next year.
#7 How to spend your tax refund: Make home improvements
Home improvement projects immediately increase the value of your property, while also making it nicer to live in.
So now would be a better time than any to invest in a new roof, kitchen, bathroom or even some energy efficiency which will help save on your bills in the long run.
#8 How to spend your tax refund: Start an emergency fund
Unemployment, medical expenses, an unplanned home repair - an emergency can strike at any time, and usually when you’re least prepared.
Don’t get caught off guard.
Use your tax refund this year to start an emergency fund with a plan to build it up so it covers six months expenses for those rainy days.
#9 How to spend your tax refund: Put in a term deposit for your children
You can put aside your tax refunds, year after year, so in the future you can cover future big-ticket expenses for your children, Etax recommends.
“Save your refund in a long term deposit or another safe long-term, interest-earning investment – later you can use it for your kids’ university education or their first car,” Etax said.
That way, when your children are older, you can give them a good leg-up without a hard hit to your wallet.
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