Why you shouldn't use your $ 1080 tax reduction to pay off your credit card – as Barefoot Investor reveals its answer to rising debt
- Scott Pape urges Australians to prevent them from paying their credit card bill with a tax reduction
- The Barefoot Investor argued that it was better to have more money in the bank
- He argued that exhaustion of savings only led to consumers putting more debts on the card
Australians are encouraged not to use their $ 1,080 tax cut to pay their credit card debt.
Bestseller author Scott Pape, also known as the Barefoot Investor, asked a reader a question about how to wisely invest a tax refund.
With 10 million Australians receiving tax cuts in the coming months, Pape suggested there was an alternative to paying the credit card.
Australians are encouraged to refrain from using their $ 1,080 tax credit to pay their credit card debt (the image is a stock image of a woman with a credit card)
& # 39; OK, so this is counter-intuitive, but if you have a credit card, don't use your refund to pay it off & # 39 ;, he told his Barefoot Investor column in the Sunday newspapers of News Corp Australia.
Credit cards usually have interest rates between 12 and 20 percent, depending on the reward points.
Nevertheless, Paper said that depleting bank savings would only force a consumer to accumulate more credit card debts as the bills piled up.
& # 39; If you're in trouble, a high interest rate debt doesn't help, it just makes everything worse, & # 39; he said.
Bestseller author Scott Pape, also known as the Barefoot Investor, asked a reader a question about how to wisely invest a tax refund
This chart shows how tax cuts are broken down by bracket: 4.5 million taxpayers receive the full $ 1,080 reduction
HOW MANY DO YOU COME BACK?
Those who earn $ 48,000 to $ 90,000 will see their tax cuts double from $ 530 to $ 1,080.
Part-time employees who earn less than $ 37,000 a year will receive a smaller tax credit of $ 255, or just $ 4.90 a week.
Phase one raises the threshold for the 32.5 percent personal income tax bracket from $ 87,000 to $ 90,000 over a four-year period until 2022
Phase twoFrom July 1, 2022, the 19 percent income tax bracket will be raised from $ 41,000 to $ 45,000. It also raises the 32.5 percent personal income tax bracket from $ 90,000 to $ 120,000
Phase three sees the 37 percent tax rate being abolished from July 1, 2024, and a new 30 percent tax rate being created for all individuals earning between $ 45.001 and $ 200,000. The number of tax brackets will be reduced from five to four for the first time since 1984
Instead of paying the credit card, Pape suggested that Australians put their tax relief on their savings account so that there was money to deal with financial surprises.
& # 39; Cash is the ultimate emergency aid, & # 39; he said.
More than 4.5 million Australians earning $ 48,000 to $ 90,000 annually receive the full $ 1,080 in tax reduction announced in the May budget and passed by parliament earlier this month.
It is part of a total package of $ 158 billion in tax relief for 10 million employees who earn up to $ 126,000.
Those who earn less than $ 37,000 will receive smaller tax cuts of $ 255 or $ 4.90 per week.
The Australian tax office recommends that tax refunds usually take five days.
Employers with more than 20 employees are no longer required to provide group certificates, which means that taxpayers must obtain them through the MyGov website or through a tax accountant.
This month, the Reserve Bank of Australia lowered the cash price to a new record level of one percent.
Bank savings accounts yield very little interest, with most products paying less than two percent interest per year.
HOW AUSTRALIANS MAY GET VERY SOON
Tax accountants H&R Block recommend that Australians find an accountant who is open on Saturdays if they want their tax return processed as quickly as possible.
Mark Chapman, director of the group's tax department, said finding an accountant who opened after hours and weekends made a huge difference.
& # 39; Much better than having to take free time to get it done with an accountant who opens only nine to five from Monday to Friday, & # 39; he told Daily Mail Australia.
& # 39; As a general rule, you need receipts and invoices to prove that you have spent the money, so collect all your papers before you visit your accountant. & # 39;
This year, tax returns have also been pre-filled by employers, banks and private health funds that provide information directly to the Australian tax office.
Many incomes no longer receive group certificates by mail or e-mail from their employer, while employers with 20 or more employees are no longer required to provide a payment summary.
This means that taxpayers who have to make a declaration must obtain it through their accountant or by visiting the myGov website.
Mr. Chapman said that those who work for small businesses may have to wait a little longer to be able to file their tax returns.
& # 39; It may take until the end of July or early August for some slow-moving organizations to fully report data to the ATO, but while we are leaving mid-July, most organizations have reported it & # 39 ;, he said.
From July 2020, smaller employers with fewer than 20 employees no longer have to provide payment statements to their employees.
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