Eight simple ways to maximise your tax return in 2023

You don’t want to pay more tax than you have to – and a big bill doesn’t always mean you owe that amount of money.

Australia has one of the highest personal tax rates in the world, and the amount of tax we pay is increasing every year. Tax at some level is important, but you don’t want to pay more than you have to. The more tax savings you can find, the more money you have for saving, investing, or for your next holiday.

Here are the things you should be thinking about to save more tax dollars (legally) and get the most from your tax refund.

Do your tax early

If you’re getting tax back it makes sense to get the money into your bank account as soon as possible and start putting the money to work. Get on the front foot with your financial year wrap up by blocking out some time in your calendar to pull together your tax information and estimate your tax return.

If you end up with a potential tax bill, don’t stress. You’ve got plenty of time to get a second opinion before you lodge your return and plan for when your tax is due if needed. Be aware you can prepare a draft tax return and hold off on lodging until just before the Australian tax office (ATO) cut-off, which can be as late as May next year.

Doing your tax return early means you can take time to make sure you don’t pay more than you owe. Picture: iStock.

Maximise your (legal) deductions

The ATO website has heaps of helpful information on what you can and can’t claim in your tax return. And with most of us having the flexibility, over the last financial year, to spend a couple of days a week working from home, most people have more potential deductions you can claim for the home office.

The key here is making sure you’ve got good records to back up your claim, so start pulling together your digital shoebox for your tax documents. If you’re like most people and haven’t been on top of your record keeping for last financial year, take the lesson and start collecting your records now for the current financial year.

Start planning for next year

Most people think the best time to do their tax planning is once the financial year is finished, but this can lead to missed opportunities.

Start a list now of the deductions you expect in the current financial year, then check in on it regularly so you don’t forget to keep anything that can put more dollars into your tax refund next tax time.

Ditch your debt

Trying to get ahead while trying to get on top of personal debt is like working with a leaky bucket, you take two steps forward and one step back. If you get a chunk of cash back in your tax return and have personal debt, think about using your refund to accelerate your debt reduction plan.

This will free up more of your regular savings to save, invest, or increase your lifestyle spending, setting you up for success in the new financial year.

If you have debt the best use of tax return money is to pay it off. Picture: iStock.

Build your emergency fund

Recent studies have shown that over 60 per cent of Australians don’t have enough savings in their emergency fund. If you don’t have a solid war chest to fall back on if something goes wrong it’s hard to make your other money moves with confidence.

A chunky tax return can be a good opportunity to kick start your emergency fund, allowing you to move on to your next step to get ahead.

Start a regular investment plan

The power of compound interest is a beautiful thing, and the strongest growth you’ll get from any of your investments is in the last few years you hold them. This means that starting a few years sooner will amplify your results.

If you’re new to investing, think about how you can use micro-investing apps to get started with as little as $1 and make your first step an easier one.

If you get a lump sum then make sure your emergency fund is healthy before spending it. Picture: iStock.

Invest in yourself

If you’re young, your earning potential is probably your biggest asset, so don’t ignore it. Whether it’s learning a new skill, taking further formal study, or starting a side hustle, increasing your income will improve your savings potential and help you get ahead faster.

Think through what you could do to upskill yourself and what it might mean for your income. ATO guidelines show investing in formal study and training is generally deductible, so spending on your education has the extra benefit of increasing your deductions in this financial year and will give you a bigger tax refund next tax time.

Treat yourself

Doing really sensible things with your tax return is, well, sensible. But, being good with money isn’t just about putting every spare cent away for the future.

Carving out some of your tax refund to spend on yourself can be a good reward for your hard work and give you more motivation to keep on a solid upward trajectory.

The key here is balance, so think about where you’re at now and the benefit of the other things you could do with the money so you don’t have spending regrets.

If you don’t have debt then splurging some money on yourself is a nice tax return treat. Picture: iStock.

The wrap

Your tax refund can be a tool you can leverage to set up this financial year for success, but only if you’re smart with how you use it. Understand your options and their impact on your other money plans, then choose the path that gives you the best bang for buck with your tax dollars.

Keep in mind that now is the time to start working on how to minimise your ATO donation next tax time. As well as planning for what has already been, get on the front foot for the year to come and your future self will thank you for it.

Ben Nash is a finance expert commentator, podcaster, financial Adviser, founder of Pivot Wealth, and Author of the Amazon best selling book ‘Get Unstuck: Your guide to creating a life not limited by money’.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.