According to the latest ATO Progress Report 10 there have been 4.37 million lucky taxpayers since 1 July 2011 who have received refunds totalling $10.24 billion. That is an average tax refund of $2,367!! **
For those that have been fortunate enough to receive it, Adrian Raftery, author of 101 Ways to Save Money on Your Tax – Legally!, gives us ten smart places to use your refund:
1. Annual one-off expenses - such as the car rego, council rates and insurance – these expenses always pop up when we are struggling for cash and make a huge dent when they we get them.
2. Super co-contribution - The thought of superannuation may be dull and boring but it is one of the best investment vehicles for your money. The quicker you can build up your nest egg, the less risk that you will need to take later in life. The Government have given some great tax incentives to help boost those retirement savings. These include the co-contribution where they match your $1,000 super contribution dollar for dollar if you earn under $31,920 right through to no tax on withdrawing super when you retire.
3. Pay off your debt - The very first thing to do when you come into money is to pay off your debts starting with those with the highest interest rate. There is no point earning 6.5% with a term deposit if you are paying 20% on your credit card debt. All debt is bad debt but make sure you pay off the non-tax deductible debt first.
4. Save for a rainy day - What would happen if there was a GFC Mark II? Last time the Government bailed us out with their stimulus packages but we may not be so lucky next time around. Don’t get caught out. All good emergency plans should have a minimum of three months’ worth of living expenses put aside in case of job loss or injury. Don’t stress if you don’t have enough funds now. Simply start putting a regular amount aside from every pay. But remain disciplined and don’t access these funds until you have to!
5. Money makes money - There are some excellent interest rates being offered at the moment online. Go to comparison websites such as www.ratecity.com.au and www.mozo.com.au to see what the banks currently have to offer. With the RBA unlikely to increase rates before Christmas it might be an idea to lock in a good term deposit rate for six months.
6. Get a financial plan - Just like fingerprints, everyone’s financial goals and needs are different so if you have quite a bit in savings then it might be an excellent idea to see a financial adviser who can tailor a plan specifically for you. Make sure that you don’t get suckered into reaching for the stars because you might be taking on risks that are not right for you. Increased risk comes with chasing high returns.
7. Cover yourself – We all know someone that has died unexpectedly before they have turned 65. If you have a mortgage and a young family, then do yourself a favour and get yourself a life insurance policy. It could be the best investment that you ever make for your family.
8. Christmas & birthday presents – How many sleeps til Santa arrives? It’s getting close. Avoid the January credit card hangover by buying all your presents in cash this year. You will feel a lot better for it.
9. Education – if you have a HELP debt then put your refund against it as a voluntary payment. Make sure you do it before 1 January 2012 so that you still receive the 10% discount as it halves after this date. If you have schoolchildren and receive Family Benefit Part A, then consider buying them a computer and text books and receive 50% back via the Education Tax Refund.
10. Buy “those” shoes – ok, I know it is impossible to force people to save every cent. You will either go insane or become an accountant! Tell your husband that Mr Taxman said that it is ok for you to go and buy those shoes that you have been eyeing off for the past six months. But on one condition, you must be a good girl and keep the shoebox for storing all your tax receipts in the coming year!
** If the average punter is on the 31.5% tax bracket, this means that the average deduction claim is around $7,513. I find this figure quite staggering – particularly when the government only wants to introduce a $500 standard deduction in a few years’ time. Why would you accept that when you have 15 times that amount in legitimate claims?
Adrian Raftery, aka Mr Taxman, is the author of 101 Ways to Save Money on Your Tax – Legally!