Smart And Fun Things To Do With Your Tax Refund

OK, you can't yet submit your tax return for 2011-2012, but if you've organised yourself, you'll be ready to go in early July, and your refund could follow before the end of the month. If you want to start planning now for what you'll do with that windfall, we have a few suggestions.

Picture by Joe Shlabotnik

The majority of Australians get a refund, and it's a substantial amount (above $2,000) for many of us. So having a plan is a good idea.

Set It Aside As An Emergency Fund

Compared to much of the world, Australia's economy is extremely stable, but the future is extremely unpredictable (just ask all the journalists at Fairfax and News Limited). Putting money aside to help in the event of an unexpected crisis is always a good idea. You don't have to tie the money up where you can't get it; an online savings account will give you a better rate of interest and still allow easy access.

Take An "All Expenses Paid" Holiday

Getting your tax refund doesn't have to be all work and no play. You need time to recharge, relax, and get away from the day-to-day, right? Consider using your refund as a set budget for a private getaway. Whether it's a trip to a place you've always wanted to visit, a cruise to a tropical getaway, or just a nice night at a B&B, if the money is spent on you and your well-being, it's not misspent. Just make sure to stick to your budget, and pick a destination or event that you'll really love. If you plan it right, you can essentially walk away with a free holiday without even touching your regular budget.

Treat Yourself To A Modest Upgrade

When the new iPad came out, we talked about potential alternative purchases that were more impressive. Treat yourself to something affordable that will also make a big impact in your day-to-day life, whether it's a new 1080p Apple TV, your own home-built HTPC, or a bicycle to get you out of your seat and into the open air.

One upgrade on that list that we can't recommend enough is a solid-state drive (SSD) for your computer. We're huge fans of replacing your primary hard drive in all of your systems with SSDs. They're getting cheaper, and the performance impact you'll feel once you have one in your system is hard to understate. You won't be sorry. Photo by Joel Bez.

Replace An Energy-Sucking Appliance

A good way to get some ongoing bang for your buck with your tax refund is to replace an old clunky fridge, washing machine, water heater, or some other ageing appliance in your home with a more energy-efficient and money-saving model. Perhaps it's time to consider replacing a few windows or upgrading your air-conditioning unit, or looking into solar. Home improvements that deliver long-term savings make much more sense than something that merely looks impressive.

Invest In Your Well-Being

If you've been putting off going to the doctor or the dentist because you were worried about how much it might cost, now's the time to make that appointment. Been meaning to get to the gym but didn't want to buy a membership until you had the money? Grab one now, or head to your local sports equipment store and look at some exercise gear for your home,

The same applies to things that are stressing you. If you've been putting off some nagging home or car repair, get it out of your mind with the money from your refund before you spend it on something fun. The benefit of having those stressors taken care of and out of your life will last far longer than the momentary pleasure of a new shiny toy. That said, if you can afford both, we recommend it! Photo by Phil Campbell.

Whatever you choose to do with your refund this year, make sure it's a smart move for you, and if you do spend it, do something with it that's memorable and leaves a lasting impact. Try to avoid using it to keep an unsustainable lifestyle afloat, or spending it on something that will only create more debt (like a car you can't afford, or paying off a credit card you're about to load up with purchases.)

So you've seen our suggestions -- what are some of yours? What will you do with your tax refund this year? Let us know in the comments below.

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Comments

    If I get one, it'll be going straight into my home loan!

      I would going to suggest for those young people who don't have a home yet they should open an home saver account and get interest + 17% from the govt! Smart investment if you want to buy a house in a few years

    Not sure if this is obvious, but if you're looking at replacing an energy-sucking appliance it's worthwhile (both for financial and environmental reasons, whichever may be your motivation) to figure out how long it will take to recoup the loss of the initial cost of the new appliance with the gain of the savings from the increased energy efficiency of the new appliance. It may turn out that that 8 year-old washer you have is worth keeping for a little while longer because the energy and water savings that you would make with a new washer as negated by the initial outlay.

      Definitely true, though I'd add that it depends on your motivation for replacing said energy-sucking appliance... It might work out cheaper to hold on to an older appliance if the initial outlay is high, but that's a purely financial consideration... Personally, I'd be more inclined to weigh the environmental/ecological benefits of reduced energy usage over straight financial costs.

        I agree with your point Spyder about the environmental/ecological benefits of upgrading. If I was to upgrade, say, a washing machine, I'd weigh up both the financial and environmental/ecological benefits vs the initial cost of the new machine.
        I guess the environmental con of purchasing a new washer is "what will happen to the old one?" If you aren't donating it to someone who didn't have a washer before, it may end up in landfill if the parts cannot be recycled.

        The problem is, it takes a lot of energy to make these appliances in the first place. If your that concerned about the environment, this is a real consideration.

    I will honestly do everything I can to get a tax bill each year, rather than a return. A tax return means they ATO has had my money for most of the year. A bill means I've had theirs, saving me mortgage interest in an offset account.

    They even give you almost 8 months to pay it back once the discrepancy is found., That's another 8 month interest free loan to save me cash on my mortgage, by which time, I'm not far off doing my next tax return and finding out how much of their money I'm borrowing for free next year.

    (obviously , I still reduce my taxable income each year as much as possible, but I hope you see my point here)

      Would love to know how you manage this... the rest of us have to pay PAYG tax. You must be self employed or something... even then dont you need to do BAS quarterly?

        There's a bunch of ways to do it. I do it by working a second job and claiming the tax free threshold on both. (Paying less PAYG isn't my reason for this, but it sure is a benefit)

          err this is illegal to do.

          http://www.ato.gov.au/individuals/content.aspx?doc=/content/39123.htm
          What if you have more than one payer?You cannot claim the tax-free threshold from more than one payer at a time.

            The linked site says nothing about it being illegal. The "consequence" it warns about is in fact the benefit I receive by doing it.
            "If you do, it will result in you not paying enough tax for the income year. This may result in a large tax bill when you lodge your tax return."

              ...Although, I did just do a quick search and find references to it being illegal in a handful other sites, they all seem to be anecdotal and I'll be continuing to do it.

              I also like RXY's method below. If your goal is a tax bill rather than a refund, there are plenty of ways to achieve it.

    will be putting mine in my offset account, and then using it for my honeymoon to bora bora next year

    I find investments always end in a tax debt. Shares profit and interest earned can stack up over the year. Best thing is you can reinvest and dont have to pay back until march the next year

    I bought new tyres last year. This year, I could put it into my mortgage, but I already pay about $100 a week extra off it. So I'm going to reward myself with something I wouldn't ordinarily buy.

      Nice, good timing for me with my tyres too.

    There is a mistake in the first line of this article. "OK, you can’t yet submit your tax return for 2012-2013, but if you’ve...". Nobody appears to have noticed, but this year's tax return is for the 2011-2012 tax year.

    As a DJ I claimed $50 worth of 'condoms' to try and make my accountant smile... didn't work. LOL

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