How Australians plan to spend their tax returns this year
The first weeks of spring are a timely reminder that tax return season is also upon us, with the self-lodgement deadline of 31 October now approaching. And although it can be time consuming, according to ASIC’s MoneySmart website, 82 per cent of us happily comply and lodge our returns on time. Which really isn’t surprising when the average taxpayer refund is now sitting around a cool $2,000.
So, when it comes to your annual tax bonus, should you save it or spend it?
Sadly, the reality of modern life and cost of living pressures means we’re largely sensible with our annual windfall. That’s according to Homeloans‘ annual Tax Refund Survey.
“Our annual survey examines Australians’ expectations and behaviour regarding their yearly tax returns – and there’s consistently a clear trend towards savings and debt reduction,” explains Will Keall, Homeloans’ head of marketing.
“We are however finding some varying trends in terms of intentions on a state by state level. For example, WA residents are more likely to pay off their mortgage, whereas South Australians see more value in saving or investing their refund,” says Will.
We’ve taken a closer look at the Tax Refund Survey findings to bring you a snapshot of tax refund spending intentions across the nation.
Western Australia – pay off the mortgage
Residents in Western Australia plan to put this year’s tax refund to good use – paying down their mortgage and adding value to their homes. According to the Homeloans research, a quarter of those surveyed plan to use their refund to help pay off their mortgage – the highest percentage nationally.
While only a small percentage will use the money for a home deposit (three per cent) or towards buying an investment property (two per cent), around 15 per cent will invest it in home renovations, compared to six per cent of residents in Victoria and Queensland.
The results also show WA respondents favour sensible spending and saving over splurging. Around 27 per cent say they will put the money into a savings account and another 25 per cent plan to use their refund to pay down debts, such as credit cards. While 15 per cent would like to put the money toward a holiday, none of those surveyed said they would use their refund to go on a shopping spree.
“Paying off your mortgage more quickly or investing in valuable upgrades or renovations can result in big financial benefits, so it’s great to see WA residents looking to make the most of their refund this year,” says Will.
South Australia – reduce that debt
South Australians are leading the way when it comes to saving their tax refund. This year, 34 per cent of South Australian survey respondents say they’ll either invest or put their tax refund into savings – just beating those in NSW and Victoria (31 per cent) at the post. And Millennials were the most likely to invest or save the money.
Reducing debt was also high on the list for SA residents, with one in three of those surveyed planning to pay down debt (such as credit cards) and 16 per cent planning to reduce their mortgage. About 12 per cent would like to use the money for home renovations.
Of all the states, South Australians were less likely to splash out on a holiday (10 per cent). Furthermore, none of the survey respondents said they would use the money to go on a shopping spree or put it towards a car, contrasting with states like Victoria, where six per cent would hit the shops and Queensland, where five per cent would put it towards a car.
“South Australia may be the Festival State, but these recent results are certainly showing ‘crow-eaters’ are prudent with their pennies,” says Will.
Queensland – it’s time to splash out
The old adage of saving for a rainy day may not apply in sunny Queensland with the Tax Refund Survey finding that Queenslanders are the least likely to save their tax refund this year. About one in four Queenslanders surveyed say they plan to tuck away their refund, compared to 34 per cent of those in South Australia and 31 per cent of residents in Victoria and NSW.
A state-by-state comparison also revealed residents in the Sunshine State were also the most likely to put their refund toward a getaway, with 23 per cent of survey respondents stating it would be used for a holiday. Another five per cent said they would put the money toward a car.
It’s unlikely, however, that we’ll see a statewide splurge. Reducing debt was high on the list for Queensland residents, with more than one in three of those surveyed planning to pay down debt (such as credit cards) – the highest state percentage nationwide. One-fifth of respondents plan to reduce their mortgage this year.
“While many Queenslanders may opt to treat their refund like a bonus, there is still a significant portion that will keep the funds in their account,” explains Will.
Only three per cent say they’ll opt for a shopping spree once their tax refund comes in and only about six per cent will spend it on home renovations.
New South Wales – save and invest
While many see their tax refund as an opportunity to splurge, the Homeloans research found that NSW residents plan to save and invest this year’s refund. One in three NSW respondents said they plan to save their tax refund for a rainy day, just behind the country’s top savers in South Australia (34 per cent).
“Residents in NSW plan to use their refund in a variety of ways, but in reality, it seems many are looking to the future – building up their savings and taking steps to become more financially fit,” says Will.
A state-by-state comparison also revealed NSW residents were among the most likely to make their money work for them – with 12 per cent planning on home renovations and five per cent putting their refund toward an investment property – the highest percentage nationwide. One in four will use it to reduce their mortgage and another 25 per cent are opting to pay down other debts, such as credit cards.
NSW residents were among the least likely to use their refund for a holiday (15 per cent), behind the top holidaymakers, Queensland (23 per cent) and Victoria (20 per cent). Only five per cent said they would go on a shopping spree after receiving their refund.
Victoria – sensible but tempted to splurge
And finally, around one in three Victorian residents surveyed plan to put their refund into a savings account, just behind the country’s top savers in South Australia. Another 30 per cent said they would use the money to pay down debts, such as credit cards.
And while many Victorians plan to use this year’s tax refund sensibly, others may be tempted to splurge on a trip or even a shopping spree. One in five said they would put it toward a holiday, just behind 23 per cent of residents in sun-loving Queensland. About six per cent plan to take the money and head to the shopping centres, the highest percentage nationwide.
“While many Victorians may opt to treat their refund like a bonus, there is still a significant portion that plan to spend it a bit more sensibly,” adds Will.
Are you expecting a tax refund this year? If so, how are you planning to spend it? Let us know your thoughts!