While big tax refunds are what most of us are hoping for around this time of year, there’s actually a lot more we can do to boost our finances before 30th June.
When it comes to personal tax returns specifically, June marks the start of a process of gathering up details of different expenses throughout the financial year, checking in on superannuation, other assets and factoring any estimated tax payments or tax refunds into personal budgets.
But it’s often worth looking beyond the bare necessities for your tax return, and checking in with other financial elements in your life, such as your health insurance, banking services and your personal budget. Taking some time to review these things now will help you start the new financial year with more awareness of your financial situation and your wealth goals – as well as a greater ability to achieve them.
So with that in mind, here are five important financial factors to check before the end of the financial year.
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Superannuation obviously comes into play when you submit your tax return, so you have to look at some basic details at this time of year anyway. But beyond the payments made by you an your employer, it’s a good idea to check out the fees, the interest accumulated and the total amount in your superannuation account to date.
If you check your superannuation before the end of the financial year, you also have an opportunity to make voluntary contributions, which could offset your assessable income on your tax return or even lead to a government co-contribution.
Taking a more long-term view, on the other hand, will help you figure out if the amount of superannuation accrued each year is enough for your retirement, how the fund is investing your super and whether the fees you’re paying are reasonable.
But if you’re pressed for time when reviewing your superannuation, the key things to look at are:
- Employer superannuation contributions for the latest financial year,
- Personal (voluntary) contributions for the year,
- Total superannuation amount; and
- Superannuation fees for the financial year.
These four elements are the most important ones to stay on top of and, when you have more time, looking at details of how the fund invests your super and how it compares to other options is a great way to make sure your retirement plans are on track.
2. Health insurance
This time of year is always busy for health insurance companies, as people scramble to sign up and get tax benefits before the end of the financial year. The Lifetime Health Cover (LHC), for example, means you pay higher premiums if you take out private health insurance after turning 31. That makes it one of the biggest incentives for people to take out private health insurance around tax time every year.
As a result, health insurance companies often advertise aggressively leading up to 30th of June, with sign up bonuses like gift cards, or added extras used to sweeten the deal. But the Australian Competition and Consumer Commission (ACCC) says it’s important to consider what’s best for your in both the short and long term.
“Particularly around 30 June (end of financial year), advertising emphasises that buying private health insurance can help you with your tax status, but this may not always be the case,” it says.
“Ask yourself whether you can afford to have private health insurance and whether you can afford not to have it.”
Whether you currently have private health insurance or are just starting to consider it, keeping these things in mind will help you make a more informed decision about how much money you put towards your health (and how you do so).
3. Interest rates
Whether they’re for a mortgage, car loan, credit card, savings account or a combination of things, interest rates definitely impact on your tax return. But as well as considering how much interest you’ve earned on savings – and how much you’ve been charged that could be considered a tax deduction – the end of the financial year is a good time to check whether you are getting the best rates for your circumstances.
While you’re taking note of details needed for your taxes, for example, you could also compare these rates with other options on the market to figure out if you can save even more money.
For example, if you carry an average credit card debt of $3000 on a card with an interest rate of 18% p.a., you could save around $150 per year on interest charges by switching to a card with a low rate of 13%.
Similarly, if you have $5000 in a savings account that offers 1.7% per annum (monthly), you would earn about $88 annually. If you switched to an account that offered a rate of 2.5%, however, you would earn $126 in interest for the year – and that’s without making any other deposits.
The point is that, when it comes to earning or paying interest, even the smallest percentage change can make a big difference in the long term. So reviewing these rates at tax time gives you a chance to make simple changes that lead to significant results.
4. Bank account fees
Do you know how much you pay in banking fees every year? While most bank accounts are advertised as fee free, there are often terms and conditions you have to meet to avoid monthly account charges, such as regular deposits.
But even if you don’t have to deal with a monthly account fee, there are other charges that could come up throughout the year. Some accounts, for example, charge money for non-bank ATM use, or only assign a limited number of monthly ATM withdrawals and charge money if you go over that amount.
There are also international transaction fees, overdraft fees, account dishonour fees, statement reissue fees – the list goes on. While these bank account fees might not be regular, over the course of a year they can add up to a lot of money.
In fact, research has shown that Australians collectively spend over $4 billion per year on banking fees, with around $1 billion going towards transaction account fees. And if you spend a lot of money on international transactions, you could also be paying up to 3% extra in fees.
But reviewing your account fees gives you a chance to make sure your bank account is working for you. If it’s not, consider comparing your current account with other options that might offer you a better deal for your lifestyle.
Even if you don’t want to switch accounts, there could be things that you can do to save money on banking fees in the new financial year. For example, checking for ATM partnerships and only withdrawing cash there or at the checkout in stores where it’s free (such as Coles or Woolworths), will help you avoid the $2 to $5 transaction costs often imposed by non-bank ATMs.
5. Personal budget
The last financial factor to check at tax time is your actual budget. Not everyone keeps a personal budget, but the details of how you spend your money can form one and give you an idea of what goals to set for the new financial year.
The easiest way to work out your personal budget if you don’t have one is to use a service like MoneySmart’s free budget planner. Seeing as you already have all your details for the last financial year handy at tax time, it’s easy to enter them into the planner to see exactly how you have spent your money. This process will also help you set goals for the next 12 months.
If you already have a personal budget that you follow, take this time to review the goals you’ve outlined and where you may have underspent and overspent, so that you can adjust it accordingly for the new financial year.
Whether your goals are to save more money or pay down your personal debt, actually looking at your money in a budget form helps put it into perspective. From there, you can even break it down into smaller, monthly goals that are more achievable in the short term and will help you keep up motivation for the long term.
This time of year sees people look at a whole range of financial factors in order to get their tax returns done. But it’s also a great way to set yourself up for greater financial success over the next 12 months.
By checking a range of different financial factors and making a few simple changes now, you could save hundreds of extra dollars in the year to come without spending a lot of extra time crunching numbers. And best of all, you can probably get it all sorted while you wait for your tax refund to land in your account.