5 Smart things to do with your tax return
- Written by Gerry Incollingo, the MD of LCI Partners
Perhaps one of the most anticipated events of the year is getting your tax return deposited in your bank account. Assuming you’re getting a refund, no doubt you’re mentally chalking up the ways you can spend your cash. Given the current situation with snap lockdowns and border closures, holidays may be off the cards—so what do you do with your tax return?
Here are 5 smart things you should do with your tax refund.
1. Create an emergency fund
If you don’t have an emergency fund, you need one. Ideally, you should have enough money to cover your bills for three months in case you lose your job or get temporarily stood down during lockdowns, especially if you are self-employed and are not eligible for any COVID-19 financial support packages. Knowing you have an emergency buffer reduces financial stress in the event you need to take your dog or cat to the vet, have a dental emergency or need to carry out urgent house or car repairs.
2. Make a personal contribution to your super
Many Australians don’t have enough money for a comfortable retirement. The Association of Superannuation Funds of Australia recommends that you couple should have at least $ 640,000 by the time you retire, providing you own your own home and don’t have any ongoing medical issues. You can contribute to your super fund, in addition to compulsory payments from your employer and any salary sacrificing arrangements. There are caps that apply to the amount you can top up in your fund without it affecting your tax. Check the ATO website to ensure your contributions remain within these concessional caps.
3. Pay off any debts
Paying off debts may not feel like the most exciting thing to do with your tax return but clearing your debts or reducing your mortgage will make managing your weekly finances easier in future. Pay off your credit card balance, clear any outstanding hire purchases or even prepay your insurances for a year.
4. Invest in shares or bonds
If your finances are in good shape, why not invest in blue chip stocks, shares or bonds? There is always some risk involved when investing in the stock market or companies, but you can minimise your risk by having a robust investment strategy and utilising the advice from a proven financial expert.
If you’re stuck in a snap lockdown, now is a great time to invest in yourself. Why not undertake continued professional development. If you choose an accredited course resulting in an official qualification that is related to your current career, you can claim a portion of the course fees, textbooks and any other course-related costs for your 2021-2022 tax return.
Gerry Incollingo is the MD of LCI Partners, a firm that specialises in accounting advisory, lending, wealth, property, insurance and legal.