For many people, their tax refund is treated like a mini lottery win. This tax time, consider putting your “gift” from the ATO to good use.
Remember that superannuation pension gets a better tax treatment that other income. Unless you’re already contributing the maximum to your super through a salary sacrifice arrangement, there won’t be many other opportunities to do some tomorrow-proofing.
The ATO keeps track of your HELP debt balance and allows you to pay it off as you go. If your salary is over the HELP repayment threshold ($55,874 for 2018 income year). HELP repayments are levied from your before-tax income automatically, with the rate starting at 4% and rising as your pay increases. You may also benefit if you make a voluntary repayment before indexation is applied on 1 June.
This could be your chance to have some smart money — that is, money put away in a just-in-case account. Most Australian banks offer higher-interest savings accounts, and while some require minimum monthly deposits, you can’t go wrong letting your tax refund earn some extra returns for a short stretch.
It’s a rare luxury to be able to pay any insurances, registrations and re-payment obligations before they roll around. Car registration payments commonly catch people off-guard, and paying extra off your mortgage will save interest on daily compounding rates. They don’t have to be left until last. Bite the bullet – defer those Manolos for now and buy them next quarter when your bills are fully taken care of.
Business tools and resources inevitably age. Why not use your tax refund to update old equipment or replace not-so-good assets with good ones? If you’re a small business, anything you buy for business use will likely be able to be written off, so you’ve got an extra to use your tax refund this way.
Having a better financial destiny is an age-old fight with discipline, but a tax refund is a chance to take some steps in the right direction.