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Turn your tax refund into smart money

October 8th, 2015

We look at simple ways to put this year’s tax cheque to good use.

How good is tax time? In exchange for a few hours filling out your tax return, you could receive a handy refund cheque. And with a bit of planning you could make the tax man’s refund go a lot further.

Receiving any lump sum of cash can make a spot of retail therapy look very appealing. But there is a whole range of clever strategies that can give you more bang for your tax refund buck. Try one – or all – of our suggestions below to maximise the value of this year’s tax refund.

Grow your retirement savings

Using your tax refund to make a contribution to your super fund could transform your retirement from a ‘costa-notta-lotta’ lifestyle to a life of luxury on the Costa del Sol. If your other half is a low income earner, consider using your tax refund to make a contribution to their super fund. You may be eligible for a tax offset worth up to $540.

Pay down debt

Home loan interest rates may have plummeted but some credit cards with the bells and whistles are still charging interest rates close to 20% p.a. If that sounds like you, use your tax refund to pay down high interest debt, and take the opportunity to shop around for a cheaper card. If you’re paying more than 9.99% p.a. – the rate available on ME’s low rate credit card, you’re paying too much.

A stitch in time…

A tax refund can also be used to pay for minor repairs before they turn into much bigger expenses. Think a thorough service for your car; some much-needed dental work; or even just repairing those broken roof tiles before they become a major liability in the next storm.

Get ahead with your home loan

Okay this is the big one. Your home loan may have the lowest rate of all types of debt but it’s also a long term affair, and any lump sum you tip into your home loan today can knock years off the term and save you a bundle in interest along the way.

Consider this. ME Flexible Home Loan customers could save around $10,852 in interest and could reduce the life of their loan by nine months simply by tipping a $5,000 tax refund after one year in into their home loan. This assumes a typical loan amount of $330,000 repaid over 24 years with a consistent variable rate of 4.88% p.a. (comparison rate 4.89% p.a.)# and no redraws or additional repayments.

To check out the savings that apply to your loan, check out the lump sum repayment calculator at www.mebank.com.au – click on Calculators.

Remember, a tax refund is money that you haven’t already factored into your household budget. That makes it much easier to put the cash to work improving your financial wellbeing, and even a small tax refund can make a big difference to your wealth when it’s used wisely.

For more ideas on getting more value from your refund cheque call
ME on 13 15 63 or visit mebank.com.au.

Interest rate is current as at 3 June 2015 and is subject to change.
#Comparison Rate for ME Flexible Home Loan of $150,000 for a term of 25 years.

The comparison rate is true only for the example given and may not include all fees and charges.
Different terms, fees or other loan amounts might result in a different comparison rate. Terms, conditions, fees and charges apply.
Applications are subject to credit approval. Members Equity Bank Limited ABN 56 070 887 679 Australian Credit Licence 229500.

Members Equity Bank Limited ABN 56 070 887 679 AFSL and Australian Credit Licence: 229500.

This content was provided by Members Equity Bank. The views expressed are not necessarily those of First Super.