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Someone on $45,000 receives a tax benefit of 19.5 per cent – income tax of 32.5 per cent plus the 2 per cent Medicare Levy, minus the 15 per cent contributions tax your fund pays on the money.
Chapman points out that for those with incomes up to $42,016, there is also a super co-contribution scheme, under which for each added dollar of after-tax contributions put into a fund, the government contributes a matching 50 cents. The government’s co-contribution is capped at $500.
If your income exceeds $42,016, the co-contribution from the government progressively reduces and cuts out at $57,016.
However, those on lower incomes are more likely to have more immediate uses for their refund, including paying bills, Chapman says.
Fast track home deposit
Glen Hare, financial planner and co-founder of Fox and Hare, says parking your tax refund in superannuation under the federal government’s First Home Super Saver Scheme can be a good way to fast-track getting on the first rung of the property ladder.
Under the scheme, first-home buyers can save for a home deposit in a quarantined area of their super account, where the money is earmarked for the purchase of property and benefits from concessional tax rates.
The amount that can be held inside super under the scheme increased from $30,000 to $50,000 on July 1.
The limit on annual contributions for a home deposit that can be parked in excess of $15,000. They must be personal voluntary contributions, rather than compulsory payments made by your employer.
Start a share portfolio
Chris Brycki, founder of online investment adviser Stockspot, says a tax refund is an excellent way to start investing for your future in the sharemarket.
A good starting point for newbies is to purchase an exchange-traded fund (ETF), whose units are bought and sold on the Australian Securities Exchange.
ETFs provide broad exposure to market returns without having to worry about trying to pick winning stocks.
ETFs are available that track the returns and prices of all sorts of markets, not just Australian shares. They include overseas equities and even commodities, such as gold – and have low management fees.
“There is no need to constantly watch the market or know which shares to buy and sell, as ETFs are meant to be ‘set and forget’ investments,” Brycki says.