You’ve completed your tax return and you’re getting a tax refund. What should you do with the extra money?
If you go out and spend it, all you are doing is giving part of it back to the government in the form of GST. Now is the time to plan to use it to improve your lifestyle in the future.
In making your decisions, consider these options:
Reduce your debts
It’s fine to spoil yourself a bit from time to time, but if you’ve got money owing, then using your tax refund to make an extra payment can really help with reducing your debt, which you’ll need to do before you get a mortgage or personal loan.
Have an investment plan
You don’t have to own a house to have an investment. Consider using your tax refund to start or top up your regular savings investment plan. This will help you meet future objectives such as a new home and starting a family.
While it is always good to have a bit of money in the bank for emergencies, now is the time to consider a longer-term plan with assets such shares. You could invest your tax refund into a new share account, or talk to one of our financial advisers about investing in managed funds. While such investments are subject to fluctuations in value, you will see them grow over the long term. There are also likely to be tax benefits from franking credits and reduced tax on capital gains.
Make an additional contribution to your superannuation fund
Even though retirement may still be a long way away for you, it’s important to remember that your super fund will likely become one of the biggest assets in your lifetime, simply due to the law of compounding interest.
The moral of this story
After you’ve submitted your tax return, think about the money you’ll receive from your tax refund and the best way to spend it. If you are not sure, talk to one of our advisers who can give you professional financial advice.