Don't waste tax return, says CU boss

3rd June 2008

As tax return time nears, a person should consider using their financial windfall to improve their finances, Credit Union Australia (CUA) managing director Graham Olrich said.

"While those shoes or new pair of jeans may be a 'must have' today, there are smarter ways to spend a tax return that could provide you with an endless shoe or jeans collection in years to come," Mr Olrich said.

Mr Olrich suggests seven ways for a person to look after their tax return.

The first and most obvious way was to reduce your debt, particularly credit cards, he said.

According to financial research service group CANNEX, some credit cards now charge more than 20 per cent on outstanding balances.

Secondly, use the tax return to help pay off the mortgage, Mr Olrich said.

"It's a great way to significantly reduce your loan and perhaps pay it off in a shorter period than expected," he said.

Third, pay off any 'interest-free' loans, such as those for buying furniture or electrical goods, for when the term has expired a large interest rate was usually whacked on, Mr Olrich said.

Even a small tax return could kick start an investment plan, which was an great method of creating long-term wealth, Mr Olrich said.

Use the extra cash to make a personal super contribution, he said.

Those earning under $58,000 a year could be eligible for the government's superannuation co-contribution guarantee scheme, where the federal government pays $1.50 for every $1 paid from post-tax income, up to certain limits.

"Investing in your super now could promote a considerable increase in the balance of your super and the income you receive when you retire," Mr Olrich said.

Open an online or a cash management account that offers higher rates of interest than a traditional savings account, up to 8.25 per cent compared with 0.10 per cent, to save more, he said.

The tax return could be used to purchase necessities such as school fees, school uniform fees and car registration, or start your Christmas shopping early, he said.

Mr Olrich said people who received a large return should seek the advice of a financial planner.

"Remember the key to building wealth and getting ahead financially is not necessarily what you earn but what you are able to save and what you invest your money in."

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