Use your tax refund to make next year better

It hasn’t been an easy year. But if you get a tax refund, here are some ways to make the future a little brighter.

The end of the financial year means that many Australians will find themselves with a pool of extra cash. 

According to the ATO 2018/2019 Tax Report, in the 2018/2019 financial year, $107 billion was refunded to taxpayers, with an average refund of approximately $2,300.  

If you get a tax refund this year, we’ve thought of some ways you could use the extra cash to make next year better. It’s a chance to improve your financial health, start a holiday fund, or learn a new skill.

The trick to making the most of your money is maximising value in areas that are important to you.

1. Pay down high interest loans

High interest loans, such as the money borrowed on a credit card, can lead to financial problems.  If you have a credit card or high interest loan, you might not be able to pay the whole amount with your tax return, but the more you owe, the more interest you’ll pay – and the harder it will be to afford the things you want down the track.

If your tax refund is a big one, try to crush your credit card debt and stop the bad interest spiral. Doing this could hold you in good stead for the following year, especially with average credit card interest rates hovering around 17% per annum.

2. Finally start that emergency fund

Many of us have read The Barefoot Investor by Scott Pape, and, if so, will be familiar with the concept of an emergency fund. Essentially, it’s a pool of money that you put in a bank account that you can’t withdraw from. Since you can’t access it easily, it’s locked away until you experience a real emergency.

It can be incredibly comforting to know you have a couple of thousand dollars – or more – for emergency home or car repairs, health issues, or to help out a family member. The issue is so many people keep their ‘emergency’ money accessible, which means it magically disappears. 

For most people the rule of thumb is that six months worth of living expenses is a sensible ‘rainy day’ amount. Still, any amount is better than nothing, and once you get started, it’s easy to top up later (perhaps with your 2023 tax return). 

3. Start a future holiday fund

Booking a holiday has traditionally been one of the most common ways Australians spend their tax return.  

Things were different in 2020 and 2021 during COVID lockdowns as we didn’t know when we would be able to travel overseas and even interstate again. 

Half of the fun of a holiday though, is thinking about it. Right now is the ideal time to start a fund that makes you excited for what’s to come.

If you get a tax return this year and you add to your holiday fund, your next trip could be paid for – without you even trying. 

4. Make yourself more valuable 

Whether you’re in full-time work, part-time work, or have a freelance career, there are many in-demand skills that will make you look more attractive to a current employer or a prospective one.

Think of anything you’d like to get better at, whether it’s Excel or copywriting, and you’re likely to find a course on the multitude of platforms like Udemy, Coursera, and LinkedIn Learning. Often you can try free versions of courses before moving to more advanced paid versions. 

There are also courses that aren’t necessarily targeted towards career upskillers, but are still thoroughly enjoyable and inspirational. Courses on platforms like Masterclass aren’t cheap, but they are well-designed and highly rated. With a bit of extra cash in your pocket, this could be the time to trial them. 

5. Take up that (expensive) hobby 

Some hobbies are expensive and that’s why some of us never give them a go. Photography, playing a musical instrument, ceramics, and sports like tennis… They’re all enjoyable and loved by many, but require a bit of an investment to get started.

If you’ve had a tax windfall this year and there’s no debt, why not do that thing you’ve always wanted to do?

Even at the the best of times, a new hobby can be an excellent way to relieve stress, give you a creative outlet, and meet new people. If you don’t already have a hobby in mind, think about the things you already love and whether there’s a related activity you could do. 

There are no shortage of outdoor, arts, spiritual or cause-related hobbies out there to discover, and websites like Meetup can connect with people who have similar interests and could help you get started. 

If you start now, imagine where you’ll be by the end of the next financial year. 

6. Donate to charity or support a crowdfunding cause

A tax refund can be a opportunity to give back to those less fortunate or in need of a leg-up. It hasn’t been an easy couple of years for a lot of people, including those affected by COVID

The great thing about donating to charity is that you feel good, while potentially setting yourself up for tax deductions. Additionally, check out consumer groups like CHOICE to ensure your donation is making a difference to your chosen charity. 

If you’re looking to support other people’s ventures, crowdfunding websites like Kickstarter or Indiegogo enable you to support creative projects around the world and follow their progress.

On crowd funding platforms, there’s a project to suit every interest, from an origami paddle board to a smart water bottle that syncs to your phone to track your water intake and reminds you to stay hydrated.

If your investment is tracking well then you’ll be able to top it up if you get a tax refund next year. 

7. Start an investment account – or top up an existing one

A cash boost can be a pleasant once off that doesn’t really make any difference in the long run. But if you’ve cleared your debts, investing spare cash is an option that can help you maximise your money. 

The thing to remember is how important an investing strategy is. Many novice investors have been burnt by falls in the sharemarket and that’s because they haven’t had a properly diversified portfolio that rebalances at the appropriate time.

Even if you don’t want to invest your tax return this year, learning about investing could make you more confident about your financial decisions. 

8. Aim to avoid a tax return next year

Keep in mind is that a tax refund is not a free handout from the tax office. It’s money owed to you for paying too much in taxes during the year and means that you gave the government an interest free loan as a result. This often happens when you work for more than one employer or change jobs during the year.

If you don’t enjoy giving the government your savings to hold onto each year, the ATO website has details on how to claim the tax-free threshold and apply for a withholding variation. This might enable you to access your money earlier in the year rather than waiting for your tax return.

Curious about how Stockspot can help you grow your wealth? Learn more at

Updated 7 June 2023. First published June 2021.

  • Chris Brycki

    Founder and CEO

    Chris has over 25 years of investment experience and spent most of his early career as a Portfolio Manager at UBS. Chris has been a member of the ASIC Digital Advisory Committee and volunteers as a member of the Investment Committee for the NSW Cancer Council. He holds a Bachelor of Commerce (Accounting/Finance Co-op Scholarship) from UNSW.

Founder and CEO

Chris has over 25 years of investment experience and spent most of his early career as a Portfolio Manager at UBS. Chris has been a member of the ASIC Digital Advisory Committee and volunteers as a member of the Investment Committee for the NSW Cancer Council. He holds a Bachelor of Commerce (Accounting/Finance Co-op Scholarship) from UNSW.

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