A tax refund can feel like an unexpected windfall, which you can splurge on treats and luxuries.
But a tax refund is actually your hard-earned money being returned to you.
So, just like I hope you are with the rest of your hard-earned money I encourage you to be wise, not wasteful with your tax refund.
Now that may make you think I’m going to tell you to put your refund toward your goals, but there are actually a few other things I think you should do with your refund before allocating it to your goals.
With the pandemic experience in my mind, the wise ways to allocate your tax refund fall into three broad categories:
- Build safety nets
- Get more tax deductions
- Flourish
Your current level of financial wellbeing and the amount of your tax refund provides a useful guide as to the best use of your tax refund as illustrated below:

One reason the economy so urgently needed to be put on life support once lockdowns began was that many Aussie had little savings and were immediately thrust into survival mode.
At the start of COVID-19 lockdowns last year The Grattan Institute used data from the Australian Bureau of Statistics to estimate that half of Australians had less than $7,000 in the bank.
Pre-pandemic for many people that probably felt like a lot of money. That’s certainly the sense I got from my years as a financial planner. But $7,000 is much less than the 3 to 6 months of living expenses that most financial planners recommend people keep in emergency savings.
So, if you’re earning an income but don’t have enough of an emergency fund of quickly accessible cash savings, then use your tax refund to build one.
It’s not as Insta-worthy as treating yourself but it will create a buffer between you and survival mode.
If you already have adequate emergency savings or have some refund left over after topping it up then listen to episode 13 of my Money for Life podcast to learn more about the other strategies.