Contribution by TaxTim
It’s tax season, and one of the most compelling reasons to file a tax return (besides the fact that it’s the law, of course) is the chance that you’ve overpaid the taxman and that you’ll hear that sweet SMS sound of funds deposited into your bank account from SARS.
Of course, the best part about a tax refund is that it’s likely you hadn’t budgeted on the extra cash, and so you’re able to spend it as you please. Whether you choose to do so sensibly or splurge a little, we’ve rounded up some ideas on how to spend or invest your tax refund.
Sensible investments to make with your tax refund
1. Reduce your debt
Use your tax refund to clear – or at least reduce – any debts attracting high interest rates such as store cards, credit cards or personal loans. Even a small payment goes a long way to bring down your outstanding balance and reduce the amount of interest charged. If you haven’t got any short-term debts, consider putting your tax refund into your bond or car finance.
2. Top up your savings
Use your tax refund to boost your existing savings account – or better yet, open one if you’re not putting money away. With the new Tax-Free Savings Accounts, available through most large financial institutions, you’re able to invest up to R30, 000 per tax year (to a maximum of R500, 000 in your lifetime) and not pay tax on any interest earned.
3. Invest in education
Quality education is expensive and often out of reach for the average South African. Although the FeesMustFall movement has gone some way to highlighting the difficulties most are having to make ends meet and study, we still have a long way to go before going to university is likely to be free.
Until that day comes, why not use your tax return to pay for a book, short course or towards a longer-term tuition for either you or your children. Your future self will thank you.
4. Improve your home
If you’re fortunate enough to own property, you can use your tax refund to add value to one of your primary assets by looking at those renovation or extension plans you’ve been putting off.
Alternatively, look into making your home more energy efficient. A great investment would be a gas stove or solar panels to reduce your electricity bill in the long term. Also, with the water restrictions why not invest in a grey water system to cut down on your water usage which in turn will reduce your bills.
Earn an extra income through building a granny flat. Any enhancement to your property adds value to your future potential selling price, and gives you the pleasure of a lovely home in the interim.
5. Kick-start your business
Do you have a burning business idea? Perhaps you’re sitting on the next best app? Or you’ve spotted a ground-breaking gap in your industry? Use your tax refund as seed capital for your new venture. Doing so will secure you income for years to come, plus you’ll be able to claim deductions for your small business on your next income tax return! (Remember that if you’re running a local business as a sole proprietor, i.e. in your personal name, you’ll need to register for provisional tax too.)
5 Ideas for splashing out with your tax refund
We don’t usually advocate spending without saving but if you have been good at keeping some money aside and paying off all your debt, there’s no reason why you shouldn’t spoil yourself. Here’s five ways in which to splash out so that you come back in the New Year, energised and refreshed:
1. Take a break
Has the travel bug bitten? Put your tax refund towards a trip you’ve always wanted to make – whether it’s local or abroad. Money won’t last, but memories and experiences do and exploring new places and cultures is often high up on one’s bucket list. Make those travel dreams come true, thanks to the taxman but be sure to shop around for the best deal so that your money stretches further and so that you can put aside some money in savings.
2. Get adventurous
Fancy yourself a bit of an adrenaline junkie but without the funds to get your fix? Extreme sports and activities generally come with a steep price tag. Whether it’s a helicopter flip, cage-diving with sharks, bungie jumping, sky-diving, kite boarding, or even a white-river rafting trip, you can use your tax return to fund an adventure of a lifetime.
3. Pamper yourself
If you didn’t use TaxTim to help you complete and file your tax return quickly, easily and correctly, there’s a good chance you’ve got some tension built up in your body and you could do with a relaxing day at the spa. Spoil yourself (and your partner or best friend) to a therapeutic massage, manicure, pedicure or body treatment to ease the stress. If the spa isn’t your idea of fun, perhaps visit a salon and try out a new hair style or colour.
4. Go on a spending spree
If you’re like most South Africans, you’re having to stick to a strict monthly spending budget. As the price of basic living expenses continues to escalate, disposable income for those little ‘luxuries’ in life has become more difficult to come by. What better way to reward yourself for all your good spending behaviour than to splash out on that big-ticket item you’ve had your eye on for months? Whether that’s the latest technology gadget on the market, a new lounge suite or a pair of exclusive Italian shoes is up to you.
5. Pay it forward
Lastly, the least ‘selfish’ of the splurge suggestions – you could use your tax refund to make someone else’s day. Perhaps you have a charitable organisation close to your heart – such as a children’s home, animal shelter, or a community centre – that could desperately do with some funds to continue the service they provide to others. Remember if they’re a registered NGO, you can add your donation as a tax deduction!
If you haven’t received a tax refund this year, take heart. While a tax refund is often seen as a bonus or benefit, it’s nothing more than a personal loan payment back from SARS at 0% interest! They’re only issued when a taxpayer has paid more tax than needed throughout the year, based on their overall earnings less all claimable deductions, and therefore they’re just giving you back your own money, which is something to consider when you choose how to spend or save it.
Handy tip: TaxTim can help you to receive your maximum potential refund when assisting you to complete and file your tax return.
If you haven’t filed your tax return yet you have less than a month in which to do so. Click here to sort it all out now through Justmoney and TaxTim.