Financial experts reveal what we should and shouldn’t be spending our tax return on

With almost three-quarters of working Aussies expected to receive a tax refund this year of close to $3000, money experts are revealing what we should and shouldn’t be spending our return on.

Almost three-quarters of working Australians are expected to receive a tax refund of almost $3000.

With almost three-quarters of working Aussies expected to receive a tax refund this year of close to $3000, money experts are revealing what we should and shouldn’t be spending our return on.

As of June 30, The Australian Taxation Office issued 10.6 million Aussies a tax refund for the 2023-2024 financial year, averaging $2962.

With returns expected to be similar for the latest fiscal year, accounting gurus have warned buying that new big screen TV or designer handbag might not be the right choice.

“The main thing is to take a step back and consider your current circumstances before just racing off to the shops to buy something fun, but unnecessary,” said Simone Gielis from Etax.com.au.

“Your tax refund isn’t ‘free money’, it’s your money that the Government held onto all year that they’re now returning to you, so treat it the same way you would your weekly pay cheque and consider the best way it can improve your life in the long-term.”

Ms Gielis said the smartest way to spend your tax return was often the most unpopular – paying down debts.

“If you have a credit card debt, or other outstanding bills, paying these down or off can significantly reduce financial stress and help you get ahead,” she said, starting with debts that have the highest interest rates.

Other intelligent ways to spend a refund revolve around making the refund work for you, Ms Gielis said, including voluntary superannuation contributions, mortgage offsets, term deposits, share investments, or even setting aside the money for large upcoming bills like insurance payments.

“Given ongoing cost of living pressures, a tax refund can be a hugely beneficial tool to help with financial comfort,” she said.

“Even if you want to treat yourself, and there’s nothing wrong with that, consider using just a portion of your refund for fun and the rest for something meaningful or financially helpful.”

Head of research at Finder, Graham Cooke, said topping up an emergency fund or savings was another useful way to spend the cash.

“If you don’t have three to six months of essential expenses saved, using your refund to build or top up this fund can provide a significant sense of security for the year to come,” he said.

H&R Block, Director of Tax Communications, Mark Chapman said the best ways to spend your tax refund were putting it into savings, everyday expenses, credit card debt or the mortgage. While, depending on your circumstances, the worst ways were on a holiday, shopping spree or gifts.

“If you don’t have any debt and your income exceeds your outgoings, it’s generally fine to blow your tax refund on something frivolous,” he said.

“But if you do have debt, don’t waste your refund on something frivolous, use it to reduce the debt.”

Originally published as Financial experts reveal what we should and shouldn’t be spending our tax return on