How to use your tax return to build a stronger financial future

Not sure what to do with your tax refund? Strategic financial decisions for your tax return begin with a strong plan.

Plan the best ways to use your tax refund in 3 easy steps

  1. Write down your financial goals in a clear plan

  2. Do a financial check-up, assessing debt and expenses

  3. Invest your tax refund in growing your future wealth

Whether you breeze through tax time or dread the extra admin, receiving a tax refund makes the effort worthwhile. For many of us, getting a financial boost will be even more welcome this year, and you might be looking around for the best ways to spend it.

These simple actions can help you figure out ways to use your tax return for a stronger financial future. And if you’re looking for inspiration on how to spend it, we suggest some ideas to consider, too.

Plan how you’ll spend your tax refund wisely

Never underestimate the power of a well-crafted plan – it’s easy to watch funds dwindle when you haven’t given them a clear direction. Recent research has revealed that 87% of us admit to splurging an average of $2,172 annually as a result of comfort spending, a figure that has increased for one in three Australians since COVID-19 hit1. Additionally, 37% of us are struggling to repay debt.2  

Like any goal, your ambitions for this year’s tax return can be more easily realised if you have a concrete plan in place. In fact, studies have found that taking the time to write down your goals and plans can actually improve your chances of making them happe3.

Once you’ve lodged your tax return, you should be able to estimate your tax refund. Use the time before you receive the extra cash to give yourself a financial check-up: understand your current financial position, assess major life changes, set financial goals and budgets, reassess debt and look at your savings accounts, including the money in your super fund.

When you have a clearer picture of your finances, decide exactly how you plan to use your tax refund to avoid excitement spending once it lands in your account. This includes any money you’re hoping to use for a holiday or other splurge – work it into your financial plan to avoid spending beyond your means.

Anticipate your upcoming living expenses

When making your plan, you might want to consider your upcoming living expenses, particularly any large, irregular bills such as car insurance and registration costs, utility bills and general home maintenance.

Putting aside some of your tax refund as a cushion for upcoming expenses or into an emergency fund for unexpected expenses helps you avoid reaching for other financial support – such as personal loans and credit cards – when the bills start to build up.

Pay off debt

If you have some debt to repay, you’re not alone: the average Australian household debt-to-income ratio is around 190%, meaning we owe almost twice as much as we earn each year4. Putting your tax return towards any outstanding debts, including mortgage repayments, personal loans and any credit card debt, may help reduce any interest charges. Read our guide to paying off debt for more ideas on where to start and how to tackle it.

According to the research…


of Australians admit to splurging an average of $2,172 annually on comfort

1 in 3

Australians struggles with credit card debt


the debt-to-income ratio for the average Australian household


Invest to build wealth

If you don’t need the money for immediate expenses, paying off debt or the occasional luxury, you might be looking to make a long-term investment with the extra money. You might consider saving for retirement by investing some or all of your tax refund to boost your super contributions, or adding it to a term deposit or savings account.

More of us are considering investing in our homes, with studies showing that $1072.5 million of residential alterations and additions were approved in March 2021, a growth of 7.3% on the previous year5. If you’re thinking about home improvements that will add value to a property, experts say that repainting rooms, upgrading flooring, updating the kitchen and adding a bathroom are among the most profitable upgrades and home improvements.

Make tax-deductible purchases

If you’ve been holding off buying specific equipment for work, such as a new laptop or desk, now could be a good time to make the purchase. For purchases over $300, tax deductions are calculated on the depreciation of the ‘effective life’ of an item7. If you purchase them at the beginning of a financial year, the item has almost a full year to depreciate before you do your next tax return.

Donate to a charity

Although this has been one of the most difficult years in living memory, Australians have shown extraordinary generosity by donating to bushfire appeals, flood reliefs and other charities – in fact, 81% of us are charity donors8. If you plan to support a charity or not-for-profit organisation, don’t forget that any donations over $2 to eligible organisations in Australia are tax deductible[2]. Just remember to keep a receipt for any charitable donations when you start preparing next year’s tax return.

For further tips on managing money, call us on Ph: 07 3340 5117 or  check out the Manage my money hub.

1. Mozo (January 2021): Mozo’s comfort spending report 2021
2. ABC (2019): Australians’ record debt is making us work longer, spend less
3. Forbes (2018): Neuroscience explains why you need to write down your goals if you actually want to achieve them
4. Reserve Bank of Australia (2021): Graphs on the Australian economy and financial markets – household sector
5,6. Mozo (2021): More Aussies renovating homes: 3 expert ways to get value for your money
7. Australian Taxation Office (2021): Decline in value of depreciating assets – individuals
8. Statista (2021): Financial donors among adults who give to charity in Australia as of January 2021Australian
9. Taxation Office (2021): Gifts and donations

Source: AMP July 2021

This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling Ph: 07 3340 5117, before deciding what’s right for you.

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