Almost one million taxpayers had already lodged their tax returns by July 9, with many unemployed and laid-off workers eyeing a refund.

The reason? COVID-19.

As previously reported by The New Daily, the Australian Taxation Office’s (ATO) 80 cents per hour method for claiming working-from-home expenses could entitle many workers to triple-figure deductions.

Those who lost income or had their hours reduced could fall into a lower tax bracket.

And the Morrison government’s low- and middle-income tax offset, which was doubled by Parliament in 2019, will also come into play.

So, what should you do with your tax refunds?

The New Daily offers some general tips below.

1. Build up your savings

Paramount Financial Solutions principal Wayne Leggett told The New Daily workers should aim to have close to six months’ net income saved – double the amount he would advise in pre-pandemic conditions.

He said having an emergency fund would help households continue to pay their bills and other expenses in the event of redundancy or ill health.

Saving money has never been more crucial. Photo: Getty

Workers worried about their jobs should consider stowing their refund in a savings account, or moving it into a mortgage offset account.

Offset accounts will earn you a better return so to speak, as the interest rate it prevents you from paying will be higher than the interest rate you earn on a regular savings account.

“Nobody who’s paying tax can afford to have money sitting in cash in something like a term deposit unless it’s part of a larger portfolio,” Mr Leggett said.

“So, anyone who’s a little concerned about their work future and doesn’t have that buffer yet would probably be best advised to err on the side of caution instead of opting for a more frivolous expense.”

2. Pay off some debt

When it comes to tackling debts, On Your Own Two Feet founder Helen Baker said the best strategy is to pay down those with the highest interest rates first, before moving on to those with lower rates.

“You might only have $1000 on a credit card but that debt could be accumulating up to 20 per cent interest per month, whereas your mortgage may be a couple of hundred thousand, but the rates are much lower,” Ms Baker told The New Daily. 

“By doing so, you may be able to consolidate some of those debts while you have a guaranteed income.”

Tackling smaller, higher-interest debts could also be done in tandem with refinancing larger loans (including mortgages), as more lenders are opting to slash their rates to strengthen their lending portfolio.

And taxpayers could consider stowing any leftover money in their home loan, she said.

If you’ve got a mortgage, offset accounts are a great place to start because you are automatically guaranteeing the interest you no longer have to pay, so it gives you some tax-free returns while still retaining the ability to access it in an emergency,” Ms Baker said.

3. Buying shares is an option, but tread with caution

Those eyeing off shares need to be wary that the market’s trajectory is largely speculative and driven by liquidity support from central banks, according to Saxo Capital Markets market strategist Eleanor Creagh.

Ms Creagh told The New Daily the current “liquidity-driven momentum” propping up the market lends an underlying fragility to share prices.

“I think for the next six months we’re entering a more difficult period, particularly as it’s become increasingly clear the world still has a COVID-19 problem,” she said.

“A lot of forecasts and assumptions were built around the fact we would be able to flatten the curve and it would be a ‘one quarter and done’ impact, and that certainly hasn’t come to fruition.”

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Market sentiment could also be dampened by US companies reporting their earnings this week, with many investors “flying blind” in predicting their corporate earnings, she said.

Ms Creagh cited stocks within the eCommerce and technology sectors – including AfterPay – as magnets for first-time investors through the pandemic, but cautioned their “easy gains” are starting to level off.

4. Invest in yourself

Beyond safeguarding income and paying down debt, some workers may be tempted to spend their tax refund on discretionary items that may have previously been out of reach.

Given the current state of the world, Mr Leggett said doing so could improve their mental wellbeing.

“You could do both yourself and the economy a favour and spend it, and maybe the best place to get bang for buck would be in domestic tourism,” Mr Leggett said.

The pandemic has also encouraged thousands to consider career changes, with online tutorials and university short courses experiencing recent sign-up boons.

Spending some of your tax refund on online courses could help you climb the jobs ladder, according to financial advisers. Photo: Getty

Ms Baker said workers could consider setting aside some of their refund to supplement their pay in the early moments of a career switch and also fund any upskilling courses.

“If you do a career change, you’re likely to be on lesser pay, and even if you are continuing work, [learning new skills] can help crank you up another pay level,” Ms Baker said.

The information provided in this article is general advice only and should not be considered tailored financial advice to your individual circumstances