Australians will receive a $10.8 billion boost to their savings after new research found two in five taxpayers plan to save their tax refund, not spend it, according to finder.com.au, Australia’s most visited comparison website.
The survey of 1,010 Australians revealed that 40% of taxpayers plan to save their return when the tax man comes around.
Analysis of Australian Taxation Office (ATO) and Australian Securities and Investments Commission (ASIC) figures by finder.com.au show this equates to Australians saving on average $2,112 each.
The research shows almost one in four (24%) will use their tax refund to pay for bills, while over one in 10 (11%) Australians will use a tax refund to go on a holiday.
Bessie Hassan, Money Expert at finder.com.au, says that potential savings in tax returns should motivate Australians to start saving.
“Remember this is a cash injection you have worked hard for throughout the year so don’t be tempted to blow it mindlessly,” she says.
She praised taxpayers who were planning to put their tax-time bonus into savings.
“The savings could be a good buffer against any unforeseen costs in the upcoming financial year or the savings could earn you interest if deposited into the right account.”
The survey also revealed that just 3% of respondents planned to splash out on upgrading gadgets like mobile phones and computers.
Men were found to be twice as likely as women to use a tax refund to upgrade these types of gadgets.
Generation Y were the most conservative with more than half (52%) choosing to save their tax refund, compared to just 35% of Gen X and 32% of Baby Boomers.
Ms Hassan urges Australians to use the tax refund to reduce debt.
“It’s worthwhile consolidating any debts you have and using any spare cash to pay down that debt,” she says.
“With group certificates arriving now, it’s the perfect time to assess your financial position – that way when the refund rolls in, you can make an informed decision about what to do with it.
Depending on your situation, you may owe tax to the Australian Taxation Office (ATO) so speak with your accountant if you’re unsure.”
You can lodge your tax return through a registered accountant or otherwise you may be able to lodge it online through MyTax which replaces the e-tax software from last financial year.
State by state breakdown
- Victorian respondents are the most likely to go on a shopping spree – with 6% choosing to hit the shops.
- NSW and Victoria residents were the most likely to save their refunds, with 42% in both states doing so.
- NSW residents were also the most likely to splurge – with 14% of residents putting their tax refunds towards a holiday.
- Men (41%) were slightly more likely than women (38%) to save any tax refund they get.
- 5% of women would use a refund to go shopping, versus 3% of men.
- Almost one in three Generation X (30%) planned to pay bills with a tax refund, compared to 18% of Baby Boomers and 23% of Generation Y.
- Baby Boomers had the least interest in using the tax time windfall to upgrade gadgets with only 1% of respondents choosing to do this.
How to maximise your savings
- Know what you can claim. Before you submit your tax return, understand which deductions you can claim. For example, if you have a home office, you can typically claim work-related phone calls, internet costs and maintenance costs for your home office. Visit the Australian Taxation Office (ATO) website to see what deductions are available to you. Also, if you rent out a room in your property, you can generally claim deductions for repairs and maintenance for the area occupied by the tenant.
- Park your funds in a savings account. When you receive your tax return, be sensible about how you’d like to use it. One way to make the most of your return is to deposit the funds into an interest-earning account. For example, a bonus saver account rewards you with a bonus interest rate if you meet the terms of the savings account such as no withdrawals for the month and a minimum monthly deposit. Alternatively, a term deposit account can help you lock funds away for a guaranteed return. Since your money is locked away with them, banks usually offer a higher interest rate than average on term deposits than they do on regular savings accounts. For instance, the average 12-month term deposit based on a $50,000 balance is currently 2.47%.
- Be selective of how you use it. If you’re not in a position to stash your tax return into a high-interest savings or transaction account, then think of ways that you can use it to improve your financial well being. For instance, make extra repayments on your mortgage, use it for utility bills or other household costs.