Happy EOFY! The wrap up of another financial year means that tax time is officially here. If you think you’ll be getting a return back, you may want to start thinking about what you’re going to do with that extra money now.
We’re here to help you consider putting that money towards bettering your financial situation instead of on a shopping spree or a big night out with your mates.
Here are a few ideas on what you can do with your return depending on how you’re feeling about your financial situation*.
1. Pay off some debt.
If you have a significant amount of debt that you’ve been struggling to get rid of, why not put the full amount towards your debt? This might not seem like the sexiest way to spend your money but it certainly is a smart move. If your tax refund isn’t enough to pay down all your debt, this extra contribution can still help you get out of debt faster, which is great. Remember that any payments you make beyond the minimum repayment will be applied directly to the balances you owe.
2. Consider investing.
Even if your tax return is on the smaller side and you only have a few hundred dollars to work with, you could consider investing it. There are a few options out there with low fees – so make sure to do your research on what’s right for you. Keep in mind, if you have a credit card or a personal loan, it’s a good idea to pay off that debt before you start investing.
You can read our blog post on investing basics if you don’t know where to start.
3. Invest in yourself.
We think it’s always a good idea to prioritise your well-being and be the very best version of yourself. If there’s a course you’ve been wanting to take, a retreat you’ve been wanting to go on, or a device that you’ve had your eye on – now might be a good time to take the leap if you’re able.
Plus, if the course or thing you buy is linked to your current job or improving your skills then it might be tax deductible too.
It’s also a smart move to pay with cash or debit vs a credit card so you’re not paying extra in interest.
A note on COVID-19 and your taxes:
If you’ve been working from home, The Australian Taxation Office (ATO) is allowing people to claim 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. Refer to the ATO or your tax agent for the full eligibility requirements.
Keep in mind that you cannot claim children's education expenses or things like tea, coffee or toilet paper.
The change will apply from March 1 to June 30, after which the ATO will review the arrangement for the next financial year as the COVID-19 situation progresses.
If you were temporarily stood down, the ATO official website says your employer may pay you regular payments or make a one-off payment. You can read more from the ato.gov.au website to find out what this can mean for you.
*Information is food for thought only and not advice. Please check with a tax advisor or your accountant before choosing how to spend your tax return.