Pay off your credit card bills and loans
ASIC’s MoneySmart findings reveal a practical trend: almost one in three Australians plan to use their tax refund to pay off bills. While it might not be the most exciting use of a windfall, channeling these funds towards existing debt is a financially astute strategy.
Prioritising high-interest debts, such as personal loans or credit cards, is key. If you have several credit cards, target the one with the highest interest rate first to maximise your impact. This disciplined approach translates directly into long-term benefits as you’ll reduce the total interest paid and, as a result, free up more of your money for future goals.
Mortgage offset account
If you’re a homeowner with a mortgage, you’ll be well acquainted with paying interest. But what if your tax refund could help you outsmart some of that interest? Enter the mortgage offset account. This powerful financial tool is essentially a savings or transaction account directly linked to your home loan.
The offset account helps take the edge off your wallet because the balance in your offset account is deducted from your loan principal when interest is calculated. So, if you have $20,000 in your offset and a $400,000 loan, you’ll only pay interest on $380,000. Over the life of your loan, this simple strategy means you could save a significant amount of interest paid, potentially shaving years off your mortgage and freeing up substantial funds for other goals.
Top up your savings account
If you’re unsure what to do, consider a savings account, particularly one offering bonus interest for new funds or for the first few months. This way, your initial refund from the ATO gets an extra boost while you weigh up your options, and your cash stays readily available.
Another savvy place to temporarily house your refund is a term deposit. The advantage here is the commitment. As your funds are locked in for a set term, you sidestep any urge for an impromptu spend. While you’re taking the time to decide on its ultimate purpose, your money is diligently earning interest, ensuring it’s productive from day one.
Invest in yourself
Consider channeling your refund into the most valuable asset you possess: you. Whether it’s that industry course you’ve been eyeing to catapult your career, a creative workshop to unlock a new passion, or a skills program to broaden your professional toolkit, investing in personal growth is an investment with big returns.
And from a practical standpoint here in Australia, if your chosen course or self-education directly enhances your capabilities in your current role or is likely to boost your income from your current job, you could be looking at a tax deduction next financial year (around July 2026). It’s a smart loop: use this year’s refund to invest in yourself, and potentially reduce your taxable income the next. Always verify the specifics with the ATO guidelines or your tax advisor, but see this as an opportunity to not just dream bigger, but to strategically invest in making those dreams a reality.
Add value to your home
Embarking on a renovation can be a truly rewarding venture, not only significantly boosting your property’s market value but also transforming your living space into a place that truly feels like home. Before you unleash your inner interior designer, however, a crucial first step is to familiarise yourself with any local council guidelines and regulations in your area – a little due diligence now can save headaches later.
The key to successful renovating, especially when working with a specific budget, is careful planning and pacing. If you need financing to complete your renovation, make sure you get a suitable loan through a broker.
Invest in some new wheels
If a car upgrade is on your to-do list – maybe to accommodate a growing family or replace an unreliable older model – then seizing this windfall can be a brilliant move. Imagine channeling that refund directly into a hefty deposit. This doesn’t just reduce the amount you’ll need to finance, it can significantly sweeten the deal on your car loan, potentially unlocking more favourable loan terms and manageable repayments.
By transforming your tax refund into a solid down payment, you’re not just buying a car, you’re investing in reliability, safety, or perhaps the extra space you desperately need.
TL;DR: Got Your Tax Refund? Here’s the Quick Guide:
- Kill Bad Debt: Tackle those pricey credit cards and loans.
- Smart Mortgage Move: Offset account = less interest paid.
- Stash it Smartly: Savings or term deposit buys you thinking time (plus interest!).
- Level Up Yourself: Courses & skills are great investments (tax break, maybe?).
- Renovate Right: Boost home value, but plan carefully.
- Upgrade your car: A car deposit makes that essential upgrade easier.
If you’re looking to reach your goals with finance in 2025, reach out to our team to learn more.
*All information provided is general in nature and shouldn’t be taken as financial advice. Always speak to your accountant or financial advisor before making any financial decisions.
