Tax time:  It can be a blessing or a curse depending on whether you’re up for a refund or owe tax. Personally I think getting a tax refund is a bad thing and detrimental to you. Why? Look at it this way: If you get a tax return it means you’ve given the Federal Government an INTEREST FREE loan of YOUR money for the last 12 months. We all know that the Tax Man charges you interest if you owe him money so why are we so elated to lend him our money and get nothing in return?

Is there anything you can do about it? Actually there is. Many people get tax refunds because they have losses on things like investment property. That loss is ongoing and usually monthly. The good news is that you can VARY your tax so that you get your refund throughout the year instead of in one lump sum at the end of the year. All you need to do is contact your accountant and request that they lodge a variation to your withholding. You will get more net pay each pay cycle BUT you won’t get a big refund at the end of the year.

So why do this? Here are a couple of suggestions as to what you could do with your extra cash flow:
1) Pay off non-deductible debt (home loan, credit card etc).
2) Make a regular contribution to an investment program.
3) Put it towards a savings buffer for emergencies.
4) Pay off investment debt.
5) Make an extra contribution towards your Super.

These are just a few suggestions as to what you could do. Notice I didn’t suggest SPENDING IT on stuff; that would be completely counter-productive. Some people view their tax returns as ‘forced savings’. Well, how do you feel about earning no interest on that forced savings? Not too enthused I bet!
We all pay our accountants to give us ‘tax advice’ right? So the next time you hand over your Group Certs and receipts ask them about varying your income. At the very least be sure they are giving you some personalized advice; after all, that’s why we pay them.

For investment ideas on what to do with excess cash flow be sure to consult a licensed Financial Planner such as myself. I know some fantastic strategies that you can employ to invest any excess cash flow.