How good is tax return time? There’s that undeniable endorphin rush that comes with an influx of cash – hip, hip, hooray! But then the conundrum sinks in: what to do with the aforementioned cash? Should one hit the shiny end of Chad-vegas, or take a more long term, practical, potentially less shiny approach?

First things first: there’s nothing inherently wrong with using a tax return to buy something you love. We’re not in the business of judging, but we are in the business of helping people to grow their prosperity, so this piece is a reflection of that. Basically, when that tax return hits your bank account, we’d love you to consider how it can make the biggest impact on your goals, both now and in the future. Here’s some ideas to start you thinking.

Pay off your debt

Yes, it’s not as exciting as some of the possibilities for that hard won refund, but the act of paying off outstanding debt, such as credit card, mortgage or personal loan can be transformational. These can often incur very high-interest rates, which makes investing counterproductive. Take it one step further and destroy the credit card by swapping it for a credit debit card account – that way you are only spending money you have. Of course, there’s good debt vs bad debt where the good is tax deductible, and bad is not, so go for bad debt first!

Top up your super

While we’re under no illusion that considering super in your twenties  isn’t on the top ten ways to spend your time, your future self will thank you for doing so. Making a personal contribution to your super fund or even your spouse’s fund you can really boost super savings. That said, it’s important to note that there are caps on contributions in a tax year and whether it is made before or after tax. This is something your accountant can discuss with you for greater clarity and advice.

Give your home some TLC and increase its value

Simple updates such as new carpets or painting can add value to a property without overcapitalising. It’s also a way to add to your own personal enjoyment – home, after all, is our sanctuary.

Create an emergency fund

Move savings into a high-interest savings account to use for emergencies, or for childrens’ future expenses, or for future you. For example, one of our clients moved five years worth of her tax returns into a fund she calls ‘Festival of 50’ which will see her celebrating her milestone birthday in a beautiful European city.

Donate it to a charity

If you’re in a position (financially) to do so, donating a tax return to an organisation that aligns to your values is a valid use of that money. It might even be a tax deduction.

Create or top up your investment portfolio

We have a colleague in the financial services space that writes a lot about the importance of building up an investment folio – you know the one, doesn’t wear shoes – and we concur. Dip your toes into the stock market, with support,  if you need it. In fact, if you’re sitting on a substantial return, it might be beneficial for you to seek out some targeted financial advice.

Spend it – wisely

If you want to shop – and again, no judgement here – why don’t you consider spending your tax return on work-related equipment over $300? This will boost your depreciation calculation and thus set up next year’s tax return beautifully!

Of course, all of these ideas to debate the spend, save or invest conundrum are offered as general advice and for educational purposes. They are extremely simplified so your best bet is to talk to your trusted advisor. For more information about how we can be of support, why don’t you book a consultation?

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