Believe it or not, around 20% of Australians fail to file their tax returns before the deadline on October 31, according to the Australian Tax Office.
Filing a tax return might seem like a laborious task, but it is a crucial process that Australians must undergo unless they prefer to pay a very costly fine, said Mortgage Choice chief executive officer John Flavell.
A penalty of $850 plus interest awaits those who choose to sit on their filing, Flavell warned.
“Meanwhile, those who do complete their tax return on time not only avoid being fined, but are often rewarded with a nice tax refund,” he said.
Tax refunds could be a good opportunity to plan for the future, whether it involves saving up for later expenses or paying off outstanding debts, Flavell remarked.
The following tips were suggested by Mortgage Choice to help individuals get the most out of their tax refunds.
- Make additional mortgage payments – People with a mortgage can use their tax refund to make an additional payment. This means you may be able to save yourself thousands of dollars in interest and slash years off your loan.
- Add your tax refund to your home loan deposit –With many lenders competing for owner occupied business, it’s a great time to take out a home loan. It makes sense for borrowers to add their tax refunds to their mortgage deposits and get on the property ladder as soon as possible.
- Use your tax return to pay off high interest debt – More than 50% of Australians have some form of credit card debt, according to Mortgage Choice’s 2015 Money Survey. Moreover, 33% of those with credit card debt are saddled with more than $5,000 worth of debt. Additionally, a lot of individuals tend to only fulfil the minimum amount of repayment needed monthly and because interest rates on credit cards are usually quite high, people can get stuck with ongoing debt. Why not use your tax return to pay off the debt?
- Start an emergency fund – Tax refunds can be used to start an emergency fund, for those occasions where money is needed the most. Individuals can deposit their cash in a high interest savings account to let it grow, keeping the account handy for when an emergency arises.
- Contribute to your super – Those with big plans for their retirement will be glad to know that they can easily deposit funds into their super any time of the year.
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