According to the Australian Tax Office (ATO), the average Australian taxpayer receives a refund of around $2000. While this amount may not be enough to solve all your money worries, it is better than a poke in the eye with a sharp stick. Even if you don’t get as much back as the $2000average, using your tax refund wisely can make it feel like so much more.
If you’re waiting for your refund to hit your bank account, you may wish to consider one of these five ways to maximise its value.
Deposit it in the bank
The safest, if not the most exhilarating, way to use your tax refund is to put the money in a high interest account, assuming you can find one paying a decent interest rate. If you still have a mortgage, or a flexible personal loan, you’re probably better off placing in one of these accounts, as the interest you will save will be greater than the interest you’ll earn at the bank. It’s important that you can still access the money should you need to, so check your loan has a redraw facility, or if possible, place it in a linked offset account.
Reduce your credit card balance
It’s estimated that 35 per cent of Australians currently owe over $5000 on credit cards and with interest rates often ridiculously high, it makes sense to reduce this debt. Once you have cleared or reduced your balance, consider cancelling your card, or switching to one with a more competitive interest rate.
Have the medical procedure you’ve been putting off
While it’s admirable to pay off some of your debt or save your money for a rainy day, if there’s a medical or dental procedure you’ve been putting off due to lack of funds, it makes sense to use your tax refund to finally have it done. Whether it’s painful teeth, a dodgy knee or even just some extensive podiatry action, you’ll feel much better for having it done and your health and medical bills may be a little less in the coming months.
Boost your super
If you’re still in the position to pay into super, you should consider the best way to use your tax refund to boost your balance. This might be making an after tax contribution to secure the Government’s co-contribution or salary sacrificing the same amount as your refund to maximise tax benefits.
Do something nice for someone
Don’t underestimate the power of doing something just to make someone smile. It may be a trip for your grandchildren, a romantic meal for your partner or maybe paying off a little of your children’s debt. If you can afford to spread goodwill, why not give it a go.