Smart Things To Do With Your Tax Refund

Written and accurate as at: 7 September 2015

According to the Australian Tax Office 1 (ATO), 77% of taxpayers received an average tax refund of $3,630 in 2013/14. 

Were you one of those people? Are you likely to receive a tax refund this year? And if so, have you thought how you might spend it? 

As tempting as it might be to use the money to go on holiday or buy that new TV, it can pay to be a bit more mindful about how you intend to spend the money so you don’t feel regret once it’s gone! 

So how do you make the most of your tax refund? 


The key is to work out where it will make the most difference to your financial wellbeing. You might consider reducing debt, putting it away for the future or using it or part of it to reward yourself. 

Here are a few smart ways you could be using your tax refund this year: 

  • Repay Debt  – It might sound boring, but making repayments on your credit card, car loan or home loan is a sure-fire way to help you get ahead. When you have debt and are paying interest, you are tying up cash flow that you could otherwise be spending or investing elsewhere. Unfortunately, debt is a leading cause of stress for many Australians, so it can help to stay on top of or even ahead of your commitments.

  • Create an Emergency Buffer – The best way to make sure that you won’t be out of pocket in case unexpected expenses crop up is to set up an ‘emergency fund’ or cash buffer. As a general rule of thumb most people set aside around six months of living expenses as a reserve. Your tax refund could be a great way to help you set up this cash reserve. It not only provides peace of mind, but ensures that you don’t have to borrow funds or swipe the credit card when the unexpected occurs.
  • Put Money Towards Savings – Do you have a financial goal that you’re hoping to achieve? Perhaps your tax refund could be the perfect savings deposit for that new car, home, wedding, holiday, or even an effective way to top up your retirement savings.
  • Go On Holiday – If you’ve been working hard and are in need of a break, then a holiday may be the best way to spend some, or all of your refund. More often than not, even a short break can help you relax, de stress and re-energise.
  • Invest in Yourself – One of the best investments we can make is in ourselves or our loved ones. Is there a course or professional development program that you’ve been considering, or a new hobby that you’d like to take up? Investing in ourselves can boost our wellbeing and increase our happiness. It can also provide benefits on both a personal and financial level, such as increasing our confidence or expanding our skill-base, sometimes leading us to other employment opportunities, or even a pay-rise.
  • Investing in Health and Wellbeing Activities – Have you been meaning to join the gym, try a new yoga class or visit the dentist? Improving our health and wellbeing is an important long-term investment and a worthy way to spend your tax refund.

When it comes to spending your tax refund, the right option will likely be different for each of us and may even be a combination of some or all of the above. The trick is not to be tempted to rush out and spend all the money right away, but instead to find the right balance and take the time to think about what will really make a difference to you personally. Consider the present and future self when revising the investment and spending options before you, and you can get the most value from your tax refund. 

1 Australian Taxation Office Annual Report 2013/14