Tax Return Party!
But What Should You Actually Do With It?
(If you’re lucky enough to get one)
It’s the time of year when those who are amongst the lucky ones will be receiving a tax return.
And what should you use this tax return for?
According to Finder’s 2026 Consumer Sentiment Tracker, 58% of Australians, said they’d put their tax refund into savings.
While in the past it has been tempting to treat tax refunds as “bonus money”, most Australians are choosing practical financial goals over splurging.
Buzz term of the year – “rising living costs” has most households using the refunds to strengthen their financial position rather than financing discretionary spending.
Discretionary spending is a broad term which can include anything from designer handbags to travel, basically non-essential wants.
Interest rate increases have put the pressure on to curb spending, which is the lever the Reserve Bank of Australia is pulling to reduce inflation and slow Gross Domestic Product (GDP).
So, is adding it to your savings the best strategy?
Yes and No… read on to find out the nuances to consider.
Adding it to savings
YES, if its to a set emergency fund.
An emergency fund should be 3-6 months of income saved in the event of disruption to earnings – physical health, mental health, sick child/partner, loss of job etc.
This is also referred to as “self-insurance”. When we provide personal insurance advice part of this is having a significant buffer to reduce waiting periods on income protection to further reduce the cost of premiums.
Pay down high-interest debt
Credit cards and personal loans often cost more interest than what you can earn from savings. Actively pay these down as a priority.
Boost your mortgage repayments
Add your tax return to your offset or pay direct to the loan. This strategy reduces the life of the loan and overall interest costs.
Invest for the future
There are many options available to investors based on your risk tolerance and time horizon. Build wealth for the future.
Top up your super
Make an after-tax contribution to super or increase/commence salary sacrificing. Be sure to check your current contribution levels so as not to breach caps.
According to Finder this is how Australians plan to spend theirs:
- 58% plan to put their tax refunds into savings, with paying household bills (14%) and reducing debt among the next most common reasons.
How do you and your household plan to allocate your tax refund this year?
How has it changed from last year?
As always, any questions or comments about this article are warmly welcomed.
General Advice Warning
The information on this website and the links have been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned in this email, consult a professional financial adviser to consider whether it is suitable and appropriate for you and your personal needs and circumstances.