The smart ways to use your tax refund

It’s the new financial year, which means millions of Australians are looking forward to receiving their tax back. With an average tax refund of nearly $3,000, there’s a host of items, experiences and necessities that Australians typically put their tax refund towards.

Here is a list of 10 things Australians could spend their tax refund on in 2022:

1. Savings

Despite the endless opportunities to splash cash on new items and experiences, many Australians are playing it safe with their tax refunds and are putting it into their savings. Having said that, savings rates are low just now so this might not be the best place to invest your tax refund.

2. Superannuation contributions

You could use this year’s tax refund to make a personal contribution into your super fund and thereby reduce next year’s tax bill (or increase the size of your tax refund). 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 (your super fund or accountant can give you guidance on how to complete the form and there’s a standard form on the ATO website here: https://www.ato.gov.au/forms/notice-of-intent-to-claim-or-vary-a-deduction-for-personal-super-contributions/)

3. Everyday expenditure (living expenses)

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. 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. Credit Card Debt

According to recent research, the average Australian credit card balance is $3,181 and with interest rates often in excess of 20%, there’s a great opportunity for Australians to reduce their debt (and their interest bills!) when they receive their tax rebate.

5. The mortgage

With the average Australian home loan around of $400,000, it’s no surprise that many Australians choose to put their annual tax refund towards paying off their mortgage. 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.

6. A holiday

Despite a large proportion of Australians putting their tax refund towards savings or paying off a debt, there is still a large number who choose to treat themselves to a holiday.

With this in mind, 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?

7. Shopping spree (clothing, homewares, etc.)

It’s tempting to treat oneself at this time of year when you suddenly receive a lump sum of money that you didn’t have before, so it’s common to see tax refunds spent on clothing or household items. With this in mind, it would be tempting to drop $3,000 on a brand new leather jacket, high-end silverware, or that lusted-after designer tote.

8. Gifts (e.g. the kids, friends, family, etc.)

Alternatively, if they’re not spending on themselves, it’s common for Aussies to spend their tax return on others, in the form of gifts.

Indeed, 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

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!

10. Car/Car loan

Although most tax refunds won’t cover the cost of an average new or second-hand car, there’s no doubt that lump sum helps to fund these big-ticket items for many Australians.

If you haven't yet lodged your tax return, don't worry – H&R Block are here to help. With expert set up and support, they can help you navigate your unique tax responsibilities, no matter what line of work you're in. Whether you choose to lodge online or in-store, your return will be double checked by one of our tax professionals to ensure you're getting the most out of your tax return.

 

 

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