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Australians Anticipate Tax Refunds in Challenging Economic Times
Image Caption: The average Australian is expecting a tax refund of $1,519 this year, with the majority planning to save that amount. (Source: Finder/Getty)
More than 10 million Australians are predicting a tax refund from the Australian Taxation Office (ATO) this tax season, with many intending to use the extra funds to address essential expenses and bolster savings amid the escalating cost of living.
Tax returns can be lodged from 1 July, with research from Finder revealing the average anticipated refund to be $1,519. Approximately 52% of respondents plan to deposit their refunds into savings, while 19% will use it to settle household bills.
Coping with Financial Strain
Graham Cooke, head of consumer research at Finder, spoke with Yahoo Finance about the prioritisation of essential costs over discretionary spending this tax season. He noted, “It’s been a hard slog for households and many are looking forward to a tax-time windfall to ease the pressure a bit.” He added that a tax refund often serves as an enforced saving mechanism for families who are managing tight budgets each month.
Over recent years, many families have depleted their savings accounts due to soaring interest rates and rising everyday expenses. Findings revealed that 43% of Australians possess less than $1,000 in their bank accounts, with the average balance among this group only $215. Experts recommend having three months’ worth of expenses in an emergency fund to manage unexpected costs, like car repairs or medical bills.
Cooke emphasised the importance of maintaining an emergency fund, stating, “The security and peace of mind of having an emergency fund can’t be overstated, so it’s always a great place to stash any windfall.”
While the majority plan to channel their refunds towards savings or bill payments, some Australians have indicated alternative uses for their tax refunds. For instance, 7% intend to invest in a holiday, 6% will pay down their mortgage, and 5% plan a shopping spree. A further 4% would like to alleviate credit card debt, whereas 1% aim to clear Buy Now Pay Later debt or a personal loan.
Timing is Key
In contrast to the common belief that early lodging guarantees a quicker refund, experts are advising caution. Individuals who submit their returns early in July are reportedly twice as likely to make mistakes, which could result in the need for amendments later. Jenny Wong, CPA Australia’s tax lead, cautioned, “It’s common for people who lodge early to end up having to amend their returns later anyway; it’s best to wait."
By waiting until late July to file, most necessary information from employers, banks, and government agencies will be pre-loaded into their tax returns, minimising the potential for errors. In the interim, individuals can prepare by gathering relevant records and receipts to ensure accurate claims.
In summary, as over 10 million Australians anticipate a tax refund this year, the financial landscape encourages individuals to prioritise savings and essential expenses. This cautious approach, paired with strategic lodging of tax returns, may provide valuable relief in these economically challenging times.
