10 Things You Should Spend Your Tax Refund Money On, According to an Accountant

10 Things You Should Spend Your Tax Refund Money On, According to an Accountant

Another financial year has rolled around, and you’ll probably be filing and receiving your tax return soon – if you haven’t already. Assuming you’re getting a decent sum back into your bank account, the question now becomes, what should you spend your tax refund on?

Mark Chapman, Director of Tax Communications at H&R Block, has given his fair share of tax advice, but what does an expert think a wise use of your tax money is?

Here are some of Chapman’s suggestions.

10 smart ways to use your tax refund money

money goals financial year
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1. Savings

It’s a boring answer, but your savings is a smart place to redirect that returned cash.

However, Chapman warned that “savings rates are low just now, so this might not be the best place to invest your tax refund.”

2. Superannuation contributions

Another not-so-exciting option but one you’ll be grateful for in the long run is turning your tax refund into a super contribution.

“Provided the total amount of your contributions (including the contributions made on your behalf by your employer) does not exceed $27,500, this can be a great way to boost your retirement savings and claim a tax deduction for the personal contribution. Don’t forget that you need to advise your super fund that you’ve made the payment by the time you lodge next year’s tax return,” Chapman said.

3. Living expenses

That extra influx of cash is one way to ease the stress of bills many of us have in these trying money times.

“In a cost-of-living crisis like the current one, the realities of day-to-day family finances mean that the tax refund can easily be swallowed up by basic necessities,” Chapman said.

“The additional support provided at tax time helps to ease a lot of financial pressure at this time of the year with refunds spent covering such essentials as heating and food bills.”

4. Pay off your debts

Chapman said the average Australian’s credit card balance is $3,181, plus an interest rate often in excess of 20%. If you’ve been racking up a credit card bill, your tax return money is a quick and easy way to pay off or reduce any associated bills.

5. Mortgage

Another bill eating away at Aussie’s pockets is a home loan, with the average homeowner borrowing $400,000.

“Given the length of time that a mortgage lasts for (up to 30 years), investing your tax return in paying off some of the borrowing is likely to pay dividends in the form of lower payments or a reduced repayment term,” Chapman advised.

6. Take a holiday

Now some fun stuff; holidays! With travel back on the cards for the first time in a few years, it might be time to pack your bags and take a well-deserved break – and your tax refund can help you do that.

“There are a number of holidays Australians can take that fit within an average tax refund, including weekend getaways, flights overseas, or a cruise. If you can afford it, and you don’t have another call on the funds, why not?” Chapman said.

7. Shopping

Look, it’s ok to treat yourself every now and then. Some even save their tax refund money for just that.

Chapman said it’s common for folks to spend their tax refunds on clothing or household items, so don’t feel guilty if you drop a few grand on that item in your wish list.

8. Gifts

With money being so tight, it can be hard to find the dollars to drop on someone else, but that’s why tax time can be a blessing in disguise.

“It’s common for Aussies to spend their tax return on others, in the form of gifts,” Chapman explained. “You could treat that special someone to that special item or a once-in-a-lifetime experience, such as a wellness retreat, spa package, or joy flight.”

9. Home renovations

Home renovations are a popular money pit following the impact of lockdowns and new work-from-home situation. If you’ve been waiting for some extra dollars to go towards that reno, your tax refund can certainly help.

“With the popularity of shows like The Block and House Rules, many Australians plan to spend their rebates on home improvements. A tax refund of $3,000 might not pay for a brand new kitchen but it’s a start!” Chapman said.

10. Car or car loan

The average tax refund isn’t likely to cover the cost of a car, but as Chapman suggested, the lump sum of dollars can help to fund big-ticket items like a new vehicle for Aussies.

Your tax refund only comes around once a year, so make sure to make that extra money worth your while!

If you’re yet to file your tax return, we have some more tips from Chapman on how not to mess that up as well as some of the wildest things he’s seen clients try and claim (as well as some that were successful).

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