Tax refund wisdom enhances wealth management
Tax refund wisdom is exercised when you use your refund effectively. You should also recognize how your taxable income has been calculated – and then strategically utilise it. It’s important to remember that this refund isn’t a gift from the ATO (or from the government)!
Moreover, ensure that the refund isn’t ‘wasted’ on discretionary spending. Rather, wisdom regarding the utilisation of your tax refund ensures it enhances attainment of your financial goals. You receive a tax refund because at some period in the past you have paid more tax to the ATO than was required for the financial period concerned.
As we reveal below, utilising the tax refund to deliberately offset (subsidise) the costs that give rise to the refund can be strategic. It can help enhance wealth accumulation.
Tax refund wisdom: planned, or unexpected?
The overpayment of tax that gives rise to a tax refund might have been for a number of reasons, including –
- The conscious decision to have more tax deducted than the schedules provide (a planned savings strategy);
- Having more than one job or source of income and the tax on the withheld on some of that income has been at a higher rate than required (somewhat an unexpected occupational ‘hazard’);
- You may have decided to not request the ATO to approve a lower rate of withholding because of deductible expenses for:
- Interest expense for investment asset acquisition (shares/ managed funds portfolio; investment property; etc);
- Income Protection Insurance premium costs;
- Work/ business related expenditure for vehicles and other equipment; or
- A range of other tax-deductible costs/ expenses. (all planned scenarios)
Tax refund allocation
Whatever has given rise to your tax refund, care should be exercised in its use. If the refund is related to some of the so-called planned events above, consider using the refund to –
- meet a specific financial goal you had in mind when requesting the increased tax withheld (holiday, car, furniture etc);
- reduce your debt or to help fund the cost for the following year (of interest borrowed for making an investment); or
- consider starting an investment portfolio.
For more ideas on the prudent use of the refund you next receive, the following articles may be of interest:
Seek reassurance in advice
The advisers at Continuum Financial Planners Pty Ltd are experienced in an extensive range of investment/ wealth management strategies.
To arrange a meeting to discuss your wealth management plan with one of our experienced financial advisers (including utilising your tax refund wisely) –
- phone our office, on on 07 34213456; or
- at your convenience, use the linked Book A Meeting facility.
(This article was originally posted by us in July 2013. We occasionally refresh/ update it, most recently in June 2025.)
