There’s a lot to love about tax time. In exchange for a few hours poring over a tax return – or getting your accountant to do it for you, many of us will receive a handy tax refund. And there are plenty of ways to put the money to good use – especially if you’re a first home buyer.
The prospect of a juicy refund cheque is the key motivator that spurs many of us into action at tax time. Just how much you get back will vary in line with a range of factors including your income, how much tax your employer has already deducted and whether you are entitled to any tax offsets.
However the beauty of a tax refund is that it’s a windfall gain – money we haven’t already built into our budget. So while a spot of retail therapy can be tempting, first home buyers can give their tax refund some serious grunt by adding it to their home buying deposit.
Turn something small into something far bigger
Even a modest tax refund can make a valuable difference to your purchase deposit if you use the cash to kick start a serious savings regime. The money can be used to open a First Home Saver Account, with all the perks that these bring including a top-up payment from the federal government that can be worth up to $1,020 annually.
Even if you stick with a regular savings account, commit to adding a set sum of cash each pay-day to the account. Bolstered by your tax refund, or savings pool will grow rapidly. Make an annual habit of adding your tax refund to the nest egg.
Pay down debt
Or, think about using a tax cheque to pay down debt. Lenders like to see that you can comfortably manage a home loan without the additional strain of personal loans or credit card repayments. Using a tax refund to make a lump sum repayment on these sorts of debts can put your home loan application in a much better light.
If you’re lucky enough to receive a hefty tax refund – tell us what you’re going to spend it on in the comments below!
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