One in two Australians to turn tax refund into savings, ME research shows
Australians may love spending money, but as it turns out, we’re also a nation of big savers. A new ME Bank survey reveals 48% of Aussies intend to stash their tax refund away for the long term, whether as an investment or inside a savings account.
The findings, released this month, show that fewer Australians want to splurge their tax refund than to save it, with just 17% saying they would splash the cash on non-essentials like a holiday, clothes, eating out or entertainment.
Another 32% said they hoped to use the extra bit of money to pay off debts such as a home loan or credit card, while about 19% indicated they would direct some of their tax refund to bills and necessities.
In 2018, Aussies who lodged an income tax return received an average refund of $2,574, according to the Australian Securities and Investments Commission (ASIC).
“If used wisely, a tax refund can be a bonus ‘boost’ to your overall financial position,” ME Bank’s General Manager of Deposits, John Powell said in a statement.
How to make the most of your tax back
Here are three tips for how Aussies can make use of their tax refund:
1. Reduce debt stress:
By injecting the refund into paying off debt (prioritising the biggest killers, usually credit cards), you could save a lot of interest in the long run.
For example, if you’ve got $4,000 debt on your credit card and started paying off $200 a month, it would take 2 years to pay off and cost you $742 in interest. If you started by using the average tax refund to pay off a chunk of your balance then started repaying $200 a month, it would only take 8 months and cost $89 in interest.*
2. Save up:
If debt isn’t your concern, store the refund for a rainy day into a separate savings account so you won’t ‘accidentally’ dip into it for unnecessary purchases. Consider a term deposit to lock away that cash and shut down any temptation to overspend.
3. Reward yourself:
It’s okay to treat yourself every now and then, so if you’ve already paid off debt and bulked up your emergency savings buffer, travel may be the perfect way to spend your refund.
In ME Bank’s survey, half of the Australians intending to use their tax back on non-essentials said a holiday was on the top of their wishlist.
And according to Skyscanner research, if you’re planning a holiday with your refund, you’re in luck.
“Travel is so rewarding and luckily, there are plenty of holiday options to suit all budgets, making a ‘treat yourself tax-back trip’ achievable no matter the size of your refund,” Skyscanner travel expert, Emily Cairns said.
- With $2,574 in your pocket - the ‘average’ refund - you could fly to and from Mykonos for $2,344 per person, Cairo for $2,170, and Copenhagen for $2,071.
- A tax refund between $500 to $1,000 could get you a return trip to Hawaii for $866 per person, Tokyo for $819, or Beijing for $704.
- Finally, less than $500 tax back is still enough to buy a return plane ticket to Singapore for $497 per person or Bali for $282.
But before you jet off, be sure to check out the best travel insurance for you or grab a travel-friendly credit card that’ll save you foreign currency fees, overseas purchase fees and international ATM fees, so you won’t return home with a whooping credit-card bill.
Save it or spend it, one thing’s clear: Aussies receiving their tax returns this financial year will have a lot of options to choose from, whether it’s stashing more cash away in their savings account or funding their next holiday overseas.
*Calculations based on average interest rate of 17.10%, with no annual fee.