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What to do with your tax refund

The beginning of a new financial year means one major thing: tax time.

The beginning of a new financial year means one major thing: tax time.

Regardless of whether you have already lodged your tax return or are planning to lodge it soon, you may already be contemplating what you can do with the money you may potentially receive from the taxation office.

At the end of the day, what you decide to do with your tax refund is entirely up to you. But, if you're searching for inspiration, then look no further.

We have come up with a few ideas as to how you can spend your tax refund.

For those who want to save

  • Save it: Do you have a financial goal you're striving towards? Your home loan deposit? Or, perhaps you'd like to buy a car soon? Whatever your financial goal, when it comes to saving money every cent counts. And, depending on how much money you receive from the tax office this year, you may just find yourself one step closer to achieving that financial goal.
  • Start an emergency fund: Where possible, it is always a good idea to have a ‘rainy day' account that can be used to pay for unexpected costs. Often in life we are faced with unexpected bills and other expenses. By setting up a ‘rainy day' account, you will never have to worry about from where you will get the money if and when those unexpected expenses rear their ugly head.
  • Pay down your debts: If you are lucky enough to receive a decent sum of money this year, why not put it towards your outstanding debts? As a general rule of thumb, it is a good idea to pay off your higher interest rate, non-tax deductible debts (like your credit card, personal loan, or car loan) first.
  • Inject the funds into your super: There is no denying that, as a nation, we are living longer - which means more time spent in retirement and more time living without a regular income. If you want to live a comfortable lifestyle in retirement, why not inject your tax refund into your superannuation fund? The more voluntary contributions you make over the years, the better off you will be in the long run.
  • Invest: Or, you may be looking to make your money work even harder for you by investing. At Mortgage Choice, our financial advisers can guide you on the best ways and places to invest your money.

For those who want to have fun

  • Buy that item you desire: There is nothing to say that you absolutely have to be responsible with your tax refund. Why not use this year's payment to buy that item you have had your eye on? Buy that Thermomix you've been dreaming about. It'll likely encourage you to make more home cooked meals, which could help you to save money in the long run.
  • Put it in your holiday fund: Saving money is important, but so is your mental health. If you've had a stressful year at work, taking some time away to relax will keep you sane and help you reenergise for the year ahead.
  • Invest in yourself: They say when you look good, you feel good. So why not spend your tax refund on yourself? Get that haircut or new suit you have been thinking about. If you are feeling good, you will be more confident, which could lead to great opportunities in work and life. Just make sure you don't spend more money than you receive from the tax office, as it would be counterproductive to throw purchases on your credit card.

For the socially conscious

  • Donate the money: If you are feeling particularly philanthropic, why not donate your tax refund to a charity that you hold near and dear? Not only are you helping a great cause, but you can claim your donation in next year's tax return.

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Posted in: Lifestyle

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