AMP Advice financial adviser Anthony Jones* gives his two cents on how to spend your tax return wisely.
If you’re set to receive a tax refund when completing your tax return this year, there are ways to make the most of the additional financial boost before you retire.
It’s tempting to treat this money as “bonus money” and reward yourself with a treat, but there are better ways to make this money work for you to help you retire right.
Making financially savvy decisions at any age is the key to a successful and lucrative retirement.
However, it is more crucial than ever to make every tax return count in the years leading up to retirement or semi-retirement.
The financial position you are in now or the next few years can greatly determine what kind of lifestyle you will lead in retirement.
Here are a few tips to help you use your tax refund wisely to set yourself up for the retirement you want.
Transitioning into retirement can be a daunting task, and boredom can creep in quickly. Embracing new markets such as the gig economy can be a great way to shake up your routine. Spend your tax return doing up your spare bedroom to rent out on AirBnB, or making improvements to your car and do a few shifts as an Uber driver. Moving out of the mainstream workforce doesn’t have to be the end of an income stream.
If your spouse earns less than you, consider being super romantic and making a contribution to their super. This could potentially entitle you to a rebate of up to $540 on your tax next year. Under the new rules, which came into effect on July 1, the receiving spouse’s income needs to be less than $40,000 for a part offset to apply or under $37,000 for the full offset to apply.
Managing debt doesn’t stop when you retire. And bad debt can seriously eat into super or retirement income. A tax return is often money we didn’t expect, so it might be best to use it to pay off a large debt than use it as a part of your weekly budget you are already maintaining. And if you’re trying to win the battle against debt, you should consider paying out any non-deductible debt first, such as credit cards, personal loans and home mortgages.
If you are feeling secure in your financial position and want to give back to the ones who mean the most to you, invest your tax return for their future. Putting your current and any future tax returns in an investment account could help give your children, grandchildren or family friends a leg up when they need it.
Under the new super rules, all personal superannuation contributions are now potentially tax-deductible, within certain limits, meaning small contributions can help to manage next year’s tax while helping you to achieve your retirement goals.
If you have been saving for your retirement well and early, you could be in an enviable financial position. Why not take a holiday when you still have a steady stream of income, a little extra money from a tax return and maybe even some annual leave up your sleeve. Always wanted to climb the Eiffel Tower, walk along the Great Wall of China or cruise down the Amazon river, what better time than now?
*Anthony Jones is an authorised representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327,, AFS Licence No. 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.