While all the previous steps are mandatory, this one is optional. Even though refactoring is rarely done at the end of each cycle, sooner or later it will be desired, if not mandatory. Not every implementation of a test requires refactoring. There is no rule that tells you when to refactor and when not to. The best time is as soon as one gets a feeling that the code can be rewritten in a better or more optimum way.
What constitutes a candidate for refactoring? This is a hard question to answer since it can have many answers—it's hard to understand code, the illogical location of a piece of code, duplication, names that do not clearly state a purpose, long methods, classes that do too many things, and so on. The list can go on ...
