Money

Making the best of your tax return

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

As the current financial year draws to a close, Australian workers have good reason to celebrate. In return for a few hours spent preparing our tax returns, eight out of ten workers expect to receive a tax refund, with the average amount likely to be around $2,317 per person. It’s a handy lump sum but the interesting part is how we plan to use the money.

According to Bankwest’s ‘Taxing Time’ survey, 81% of Australian tax payers anticipate getting some money back from the Tax Office. Only 6% expect to pay tax and 13% reckon they’ll break even.

Among those expecting a refund, the average amount due is $2,317. Almost one in two people plan to use their refund to pay off some debt – which is great if you can do it - while some plan to save, and others intend to spend their refund simply meeting basic living costs.

However 18% of workers say they will use the cash to treat themselves to something special – typically a holiday or electronics.

It’s always tempting to use a windfall like your tax refund to indulge in some retail therapy. However a few smart strategies could see you get considerably more value from your tax refund.

If you have a home loan it’s worth using your refund to make an extra payment. On a mortgage of $350,000 charging 7.0% interest, tipping the average refund of $2,317 into your loan could cut up to $9,912 off your overall interest bill. It’s an easy way to more than triple the value of your refund.

If you planning to save the refund, try depositing the money into one of the online savers currently paying over 6% interest. Add an extra $50 each week and after just three years you could have a nest egg worth $11,314. Check out websites like RateCity and InfoChoice for details of the savings accounts paying the highest returns.

Or, you could use the money to boost your retirement lifestyle. Let’s say for example that a worker currently aged 30, contributes the average tax refund of $2,317 to their super fund. We’ll assume a ‘balanced’ style of fund delivering average annual returns of 7.5%. By getting into the habit of contributing a refund of this size into his or her super fund each year, our hypothetical worker could have an extra $91,208 in super by the age of 60.

To see how much you could benefit by using your refund to reduce debt, start a savings plan or build an investment portfolio, take a look at the range of online calculators available. The government’s new Money Smart website at www.moneysmart.gov.au is a good starting point.

Do remember, you tax return must be lodged by 31 October 2011 if you’re preparing your own return. You could have up until May next year if you use a registered tax agent.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

Topics:  bankwest, clitheroe, tax, tax return, tax time


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Search for Lismore’s new supermodel

Senior finalists represented Lismore in the 2015 Tamblyn Model Discovery Grand Final.

Tamblyn Young Model Search held from Thursday at Lismore Square

Woolworths to sack 500 staff, close at least 17 stores

This is despite the supermarket earning $2.5 billion for the year.

The best and worst bits of Splendour from our experts

The Amphitheatre received Flume with open arms and danced to his music on Sunday night.

Glitter, fake marriages, see-through clothing and gorgeous weather

Latest deals and offers

Was this band expelled from Splendour for nudity?

Melbourne bar owner says he saw UK rock band Fat White Family being escorted out of the backstage area

Search for Lismore’s new supermodel

Senior finalists represented Lismore in the 2015 Tamblyn Model Discovery Grand Final.

Tamblyn Young Model Search held from Thursday at Lismore Square

Woolworths to sack 500 staff, close at least 17 stores

This is despite the supermarket earning $2.5 billion for the year.

The best and worst bits of Splendour from our experts

The Amphitheatre received Flume with open arms and danced to his music on Sunday night.

Glitter, fake marriages, see-through clothing and gorgeous weather

Splendour found The Cure

Robert Smith at the Splendour in the Grass Amphitheatre stage during The Cure's show.

Day two of Splendour in the Grass

Gallery donations roll with thanks

Donors gather at The Regional Art Gallery hear from the architect, Dominic Finlay Jones, about the redevelopment of the gallery.

Regional Gallery thanks donors helping with redevelopment

NORPA brings My Radio Heart back

Performers in the NORPA co-production My Radio Heart, from left, Randolf Reimann, Phoebe Rose, Mathew Daymond, Claudie Frock, Zac Mifsud (sitting), and Lydian Dunbar. Photo Cathy Adams / The Northern Star

The piece premiered in 2014 in Lismore

Kerri-Anne Kennerley to Sonia Kruger: "Stay brave"

She said her television peer should "stay brave"

Swimwear designer looking for love on The Bachelor

Noni Janur on her first day of filming.

The 25-year-old is one of 22 women vying for Richie Strahan’s heart

Elena wins MasterChef: “I’m ecstatic and eager to celebrate"

MasterChef Australia 2016 winner Elena Duggan, from Noosa.

NOOSA chefs survive marathon grand final dish by Heston Blumenthal.

Shannen Doherty shaves hair during cancer battle

Shannen Doherty has completely shaved off her hair

Brian McFadden makes daughters pay for own Christmas gifts

McFadden makes his daughters pay for half their presents

You can own this Queensland town for just $1

Yelarbon

Unprecedented auction of town's business centre with no reserve

Work starts on $15M Caloundra apartment building

Turning the first sod at the Aqua View Apartments site in Kings Beach are (from left) husband-and-wife developers Alex Yuan and Stella Sun with construction company Tomkins director Mike Tomkins and Councillor Tim Dwyer.

Developers excited about addition to Kings Beach skyline

Plans revealed for 1500-lot 'master-planned community'

Precinct will be bounded by Boundary St and Shoesmith Rd

Ecco Ripley sales run sparks prime release

MOVING IN: Sekisui House has announced the release of more residential blocks at Ecco Ripley.

Sekisui House is preparing to unveil more land at Ecco Ripley

Massive residential 9-storey high-rise hit by delays

An artist’s impression of the eight-storey-high apartment complex that Bernoth Holdings wants to build in South Toowoomba, next to the City Golf Club.

Developer struggles to get approved high-rise development started