7 Smart Ways to Spend Your Tax Refund
Getting a big tax return at the end of the financial year is exciting for many. It might mean a new TV, a used car, or even a holiday. Although not as gratifying, don’t go splashing that cash just yet. Instead, learn smart ways to spend your tax refund in a way that’ll benefit you in the long run (such as paying off a small personal loan).
To get you started, we’ve put together the top 7 smart ways to spend your tax refund. Read on to get the best tax refund spending ideas!
Overview:
7 smart ways to spend your tax refund
1. Buy important work equipment
Although the financial year may have just ended, it’s never too late to start thinking about the next one. A smart way to spend your tax refund is to reinvest in your work. If you know you require equipment or tools, particularly expensive ones, use your tax money; these items will give you a better deduction come next financial year and are a great way to save money in the long run.
Not sure what things to invest in? Have a look at this list of things you can claim on your tax (depending on your occupation):
- Computer equipment
- Power tools
- Office equipment such as printers and furniture
- Uniforms and work boots
- Shelving and storage
If the item costs less than $300, you can claim the whole amount on next year’s tax. If it was more than $300, you can claim depreciation (loss of value). Buying work equipment with your tax return makes sense, just make sure you keep your receipts!
2. Invest in yourself
Education and training can be expensive, so if you’ve been wanting to learn a new skill, now is the time! It could be something fun like getting your scuba diving certificate, or you could invest in something to earn more money in the future, such as getting your truck license.
Think about what you want to achieve and invest the time and money into making it happen. Not sure what you would like to study? Try this questionnaire from Open Universities.
3. Take a holiday
While paying off debts or putting the money into savings is a smart way to spend your tax return, taking a break is just as valid.
A study from the American Psychological Association concluded that taking a holiday is proven to reduce stress levels. This is important, as constantly high-stress levels can lead to a range of health conditions, including high blood pressure. Given that international travel is off the cards, for the time being, a week away in a different state or town is a great, inexpensive way to unwind. On top of that, you are supporting our local tourism industry too. So, when considering how to spend your tax refund, consider a week away as a good investment.
4. Pay off any pressing debts and loans
If you have credit card debt or a cash loan, using your tax return to pay part (or all) of it off should be your main priority.
Even if you apply some of your tax return to an existing loan while not fully paying it off, having a lower overall balance will ensure that interest payments are minimised as much as possible.
5. Upgrade your necessities
Has your fridge been on the fritz? Or maybe your washer has been creating an ever-growing puddle. Putting your tax return towards a much needed new appliance is never a bad idea. If you choose an energy-efficient model, it could even end up saving you money in the long run. According to The Atlanta Journal, an energy-efficient fridge could save you as much as $200 a year on your electricity bill. This guide from energy.gov.au can help you choose the best model. Appliances you might consider investing in include the following:
- Fridge
- Washing machine
- Air conditioner
- Clothes dryer
- Dishwasher
- Televisions and computer monitors
6. Invest in super contributions
Planning early for retirement is one of the best financial moves you can make. Having more money saved enables you to entertain hobbies, buy a new car or take a holiday while you’re in retirement.
How much super you should have is dependent on your lifestyle. But aiming for a comfortable standard of living is what we all strive for during retirement. The Australian Securities and Investment Commission offers the below table to indicate typical living expenses during retirement.*
| ASFA Retirement Standard | Annual living costs | Weekly living costs |
|---|---|---|
| Couple — modest | $41,446 | $794 |
| Couple — comfortable | $63,799 | $1,222 |
| Single — modest | $28,775 | $551 |
| Single — comfortable | $45,239 | $867 |
Source: September quarter 2021 (national), The Association of Superannuation Funds of Australia
*assuming the retirees own their home outright and are relatively healthy.
It is advised by ASIC that two thirds of your current income will suffice during retirement, and this number will often account for some luxuries dependent on your current salary. Investing now means more chances to enjoy the good things later on – which is a very smart way to spend your tax refund in our eyes!
7. Build up your rainy-day fund
With life throwing all sorts of unexpected financial situations at us, emergency funds are crucial. With enough of a monetary reserve, those in need can manage surprises such as car repairs, large bills or even simple day-to-day food bills. So before you go on a shopping spree, consider putting a significant chunk of your tax return into your savings this year.
This year’s tax return not enough?
If you’re like many other Australians, you might not have received as large a tax return as you anticipated. If you need a little help, Swoosh offers highly flexible secured loans delivered to you quickly. We also have debt consolidation loans that can help you to reduce your interest, fees and monthly payments on multiple loans. To learn more about our services, get in touch with our friendly team today.
Tax return FAQs
What is the smartest thing to do with a tax refund?
The smartest thing to do with a tax refund is to spend it in a way that benefits you in the long run. This could be paying off a debt/loan, upgrading your necessities or adding it to your savings. It ultimately depends on your circumstances, but just make sure you think carefully about how to spend it before going on a shopping trip.
How can I maximise my refund?
There are a number of ways you can maximise your tax return. Here are some examples:
- Claim as many work-related expenses as you can (e.g. tools and work-specific clothing, laptops and phones, courses and conferences)
- Claim deductions for working at home
- Get help from a tax agent (you can claim it on next year’s return)
What can I spend my income tax on?
You can spend your income tax return on anything really! But we recommend using it wisely rather than frivolously, such as investing in your super, upgrading your skills or buying something essential (like a car).
