Kick start a financial plan with your tax refund

Tax time is just around the corner, and for younger adults, let’s say 18-35 year olds, the tax refund is often viewed as a bonus. A shot of extra money to splurge on something special. A quick getaway, a new dress, or a bit of luxury you’ve been eyeing off. It could also be the injection needed for a much more powerful investment in your financial future.

If you haven’t already, now is the time to organise the essentials before going to your tax agent or preparing your refund online. What you should prepare:

• PAYG summaries, interest statements, side hustle invoices, etc.
• Work from home expenses and deductions. Check with your tax advisor about the current WFH rate. Self-education, out-of-pocket professional development and workshop expenses, tools, professional memberships, and charitable donations.
• Private health insurance details.
• Receipts for anything you plan to claim – log them digitally if possible.

Categorise these to save time and ensure you haven’t missed anything. Use the ATO’s myTax tool or engage a professional tax agent.

It is important to understand that a tax refund is not a bonus. It is your money, a return on the excess tax you’ve already paid. You can reframe your refund from a bonus or windfall to a capital injection into your wealth accumulation strategy. Rather than use it for short-term gratification, you put it to work for long-term compounding wealth growth.

There are several financial strategies to get your refund working for you. Here are a few ideas:

Pay down bad debt. Credit card or after-pay debt is killing your finances. High interest and long payment times erode your chances of getting meaningful savings behind you. Use your refund to pay down as much of this debt as possible. Use the interest savings to start a savings momentum.

Start or add to an emergency fund. An emergency fund is one of the smartest financial packages you can establish. Aiming for around 3-6 months of saved living expenses in a high-interest account gives you peace of mind and a newfound freedom from life’s hurdles.

Invest in yourself. Use your refund to start or add to a micro investment account. Micro investing has pros and cons; however, it builds good habits and education with little paperwork. Another option is topping up your superannuation. Every dollar you add compounds over a long period. Enrol in a course or upskill opportunity. You can claim the cost next year and give yourself a higher earning potential.

Reward yourself smartly. There is always room for small but significant rewards. Set aside 10-20% of your refund to splurge, and invest the remaining into debt reduction, saving options, or professional improvement opportunities.

Tax time is great for taking stock of your finances, resetting, and rebuilding. The past twelve months may not have been as financially rewarding as expected or may have catapulted you to a new level. Whatever the outcome, a tax refund is an opportunity to realign your financial goals and restart or establish an achievable financial plan. Younger Australians have time on their side, and the sooner they can begin their wealth accumulation journey, the better off they’ll be. Seeking professional guidance from a qualified and experienced financial planner keeps you on track and maximises your options. We are your money mentors.

Step Up Financial Group, now AFPG, is a team of qualified financial specialists. Every year, we help hundreds of Australians create financial stability and resilience while building toward a confident retirement.

Contact us today for experienced, compassionate, and professional financial planning advice.