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What Should I Do with My Tax Refund?

The federal government has passed legislation on a Personal Income Tax Plan, a seven-year plan of income tax cuts. Whilst the initiative is aimed at boosting our economy, many Australians are unsure of what to do with their personal refund.

So, are you unsure of what to do with your tax refund?

SDK Finance has a few simple ways you can use your refund to become more financially comfortable.

So, before you go splurging on a new wardrobe, consider these smart options to use your tax refund. At SDK Finance, we hear from plenty of Australians about the ways they want to use their tax refund. Here are a few simple ways to intelligently use your refund.

1. Top-Up Your Super Contribution

According to ASIC, a single person retiring at 65 with a ‘modest’ lifestyle (with annual living expenses of around $23,000) will require $300,000 to retire comfortably. People who want a ‘comfortable’ lifestyle (with living expenses of $41,830 a year) will require at least $544,000 to retire comfortably.

To most people, these are big numbers. Topping up your super early means there’s more time for your savings to accumulate.

Simply contact your superannuation advisor or fund for advice and learn how to transfer your tax refund into your super fund. You’ll be grateful for it in the future.

2. Purchase Work-Related Equipment

Buying work-related equipment that costs over $300 now will provide you a better deduction on next year’s tax return.

Work-related equipment that costs you more than $300 needs to be depreciated over its “effect life”. If you purchase these items at the end of the financial year, the benefit for these products come next tax return will be minuscule. But if you buy them earlier in the year, such as July or August, your depreciation calculation will cover more time. This means a greater deduction on your next tax return. Your tax agent can help make this easy for you.

3. Save for the Kids

You can set aside your tax refunds each year so that you can cover future expenses for your kids. Save your tax refund in a long term deposit or a different safe long-term, interest-earning investment. Later on you can use this money for your kids’ first car or university education.

When your kids grow up, you can provide them with a healthy leg-up without it hitting your wallet too hard.

4. Pay Off Debt or Credit Card Loans

If you have a personal or loan or credit card debt that simply never seems to be paid off, now’s your time to do it.

Consider using your tax rebate to lower your personal low or credit card debt. You might even be able to pay it off in a lump sum. Your interest payments will lower as soon as you pay your outstanding balance. Once you’re debt free, you can start using the money for what you want, as opposed to contributing to the bank’s profits by paying ongoing bank interest payments.

5. Mortgage Offsetting

If you have a mortgage, your mortgage provider or bank probably offers a mortgage offset option.

A mortgage offset account basically works like a savings account. As opposed to receiving interest on your savings every month, your offset account balance is deducted from your outstanding mortgage loan balance. It is then used to calculate the interest element of your mortgage payment.

You will end up paying a lower amount on your mortgage, providing you with more money. You can pay your home loan off at a quicker rate and pay less of our own money in interest charges. Your offset account balance will still be ready for you to use in an emergency.

Contact Our Experts

Need some help deciding what to do with your tax refund? The professionals at SDK Finance are experts in smart investment, and can help you use your tax refund to get a leg-up in the future.

If you would like to find out more regarding smart investment options, please feel free to get in contact with our friendly team of staff. We are committed to providing our clients with an impeccable standard of service and will be happy to assist you with all your refund enquiries.

Simply call us on 0438 205 886 or submit an enquiry form on our contact page and we will get back to you with all the information you require.

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