It seems, when it comes to how best to use a tax refund, average Aussies to fall into one of two camps: those who spend and those who save.

Those who advocate the ‘spend’ philosophy see a tax return as a golden egg, an annual dose of happiness which they eagerly embrace.

Savers, however, view their refund as merely another piece of their income pie which should be treated just like every other dollar they earn.

To the wise saver a refund is not a windfall.

Before deciding what to do with any refund, perhaps savvy taxpayers should apply the Charles Dickens’ litmus test by reviewing their past, present and future financial positions. 

As the Australian Securities and Investment Commission’s MoneySmart website suggests, take time to determine where your refund money can make the greatest difference.

This advertising feature is sponsored by the following businesses. Click the links to learn more:

No one likes living with the spectre of debt hanging over their heads. The sooner you rid yourself of debt the better. Paying off debts means you'll pay less interest, save money and reduce stress. 

Consider paying off higher interest debts like credit cards first. Outstanding bills can also be cleared and fines paid. Tax refunds can be used to make a dent in a personal loan or get back on track with mortgage repayments. 

Content to use the funds lock, stock and barrel, spenders argue they boost the economy with some retail therapy come refund time, rewarding themselves with a holiday (to the coast or the Continent, depending on the size of the return), new car, jewellery, gaming consoles, clothes, or even a swimming pool. 

But there are other ways a refund can reduce stress.

Consider using the payment to tend to any home improvements causing concern, or purchase more costly items needed (like a laptop or tablet, a new fridge or tyres for the car).

Some taxpayers are proactive and pay a small amount of additional tax each week as a form of enforced savings. Then, when the refund arrives they use it to set up a brighter future for them and their families.

And that doesn’t always mean hiding the money in the sock draw or under the bed. There are a range of creative options people are pursuing.

Water cooler conversation reveals regular refunds are being used by parents to:

Others taxpayers are making one-off payments to their superannuation fund, buying small parcels of shares or using the money to seek advice and develop a long-term financial plan.

No matter how you are considering investing your refund, it is wise to first seek financial advice. Experts can guide you towards the best course of action to maximise income and reduce liability.