Australians use tax refund windfall to give debt the boot
‘Divorce’ is on the (credit) cards for finance savvy young adults. Those straddling the end of Generation Y and the start of Generation Z plan to end their relationship with debt, particularly credit cards, judging by Homeloans‘ latest survey. The poll shows that more tax refund dollars will be used to reduce personal debt – including credit cards – than anything else this year, especially by the youngest demographic.
Nearly three quarters of respondents to the annual tax refund survey expect to receive a refund from the taxman this year. But the big news was what they planned to do with the money. Overwhelmingly, across all age groups, respondents said they wanted to pay off debt. Indeed, more than half of respondents who expect to receive a tax refund this year will be doing this. Non-mortgage debt such as credit cards is particularly in the firing line (around 35% of those expecting to receive a tax refund will put it towards this), while almost a quarter will put it towards their mortgage.
This was especially true of the 18 to 24-year-old demographic. These young adults appear keen to jump into the housing market or strengthen their foothold, with more than 15 per cent planning to put their refund towards a home deposit and the same number earmarking it for mortgage reduction. A quarter had personal debt in their sights, while more than a third planned to invest or save the money.
“This is the generation born in the 1990s and these results reflect their more prudent approach to life,” says Will Keall, national marketing manager, Homeloans.com.au. “But that doesn’t mean they’re all work and no fun. This is also the group that more than any other has plans to travel, with more than a third telling us that they would use their expected refunds for a holiday.
“Debt reduction really stood out as a major concern among respondents, and it’s obvious that people are cautious with their money. However, that’s not to say they also aren’t planning to treat themselves.”
More than one in five (20.8%) plan to use the money to take a holiday, which is up from last year (18.1%), with some respondents planning to use it on weddings and honeymoons, furnishing their home – even buying a new dressing gown and running shoes!
And those least likely to save/invest were the 35 to 44-year-olds (16%).
Keall says the survey results are pleasing, as they show Australians are wisely trying to get their finances under control. “We applaud that, because the pathway to housing affordability is significantly smoothed if people can approach a potential lender with a proven ability to repay debt. It also helps people to save for a home deposit if they can put the money they would otherwise pay on credit card interest repayments into the bank instead.”
The survey was also good news for accountants and registered tax agents. Most respondents over the age of 35 opted to have a professional prepare their return. “This could explain their optimism when it comes to expected refunds,” Keall says. “Accountants and registered tax agents are professionals who know how to help people claim everything to which they are legally entitled.”