October 14, 2015
As the deadline for filing tax returns fast approaches, new data would suggest many Australians are yet to complete the task.
According to data from the Australian Tax Office, approximately 20% of Australians fail to lodge their tax return before the October 31 deadline.
Mortgage Choice chief executive officer John Flavell said while filing a tax return can seem like a daunting and time consuming chore, it is important for Australians to meet their tax deadline lest they face a hefty fine.
“Those who don't complete their tax return on time can incur a penalty of $850 plus interest,” Mr Flavell said.
“Meanwhile, those who do complete their tax return on time not only avoid being fined, but are often rewarded with a nice tax refund.”
For those who do receive a tax refund, Mr Flavell said it is important to invest the money wisely.
“Your tax refund could be a good opportunity to plan for the future – whether that involves growing your savings or paying off your debts,” he said.
To help Australians use their tax refund wisely this year, Mortgage Choice provides the following top tips:
Add to your home loan deposit: With banks aggressively competing for owner occupied business, there's never been a better time to apply for a home loan. So why not add your tax return to your home loan deposit and get yourself on the property ladder sooner rather than later?
Target high interest debt: According to Mortgage Choice's 2015 Money Survey, more than 50% of Australians have some form of credit card debt. Of those with credit card debt, more than 33% boast more than $5,000 worth of debt. Worse still, a lot of people with credit card debt tend to only make the minimum repayments each month. And, given that interest rates on credit cards are notoriously high, many get stuck with ongoing debt on their credit card because they can't break the cycle. Using your tax return to pay off debt is the perfect solution.
Start or increase your emergency fund: Life is full of surprises, some more expensive than others. As such, it is always a good idea to have an emergency fund. You can use any money you receive from your tax return to either start or build an emergency fund. Placing the money in a locked, high interest savings account will not only provide you with accumulated interest, but peace of mind.
Top up your mortgage: For those with a mortgage, your tax return can provide you with the perfect opportunity to make an additional payment. When it comes to your mortgage, every extra cent counts. If you put your tax refund into your mortgage each year, you may be able to save yourself thousands of dollars in interest and slash years off your loan.
Inject it into super: If you don't have a mortgage, another great way to spend your tax refund is by injecting it into your super. This will help you to grow your nest egg, which will help you tremendously in retirement. You can make a contribution at any time of the year by depositing funds straight into your super.