Millions of Australians say their tax refund is critical to their financial health, new research has found.
A survey by comparison site Finder revealed one in eight Australians (12%) – equivalent to 2.4 million people – believe this year’s tax refund is ‘critical’ to the household budget. And almost 1 in 4 (23%) say the end of financial year cash injection is ‘very important’ to their budgets. The research shows 1 in 7 Australians (15%) – equivalent to 3 million people – will be withdrawing their refund to pay for household bills, while 5% will be putting it towards their mortgage. Rebecca Pike, money expert at Finder, said the cost of living crisis has triggered an over reliance on tax returns. “There’s a cash flow crisis and many are counting on their tax return to address everyday expenses and get them out of a tight spot," she said. “If you’re waiting for your tax return to bail you out, you are likely living beyond your means.” More than 1 in 3 (36%) Australians – around 7.3 million people – plan to put their tax return into savings. Based on the average refund being $2,900, Finder estimates that a staggering $20.8 billion would be put into savings this tax season.
Ms Pike said investing your tax refund could create passive income.
“If you get a tax refund this year, it can be tempting to spend it all. But if you invest it strategically, you can generate passive income for years to come. Put it in a high-yield savings account or jumpstart your investing journey to build wealth, ” she said. Ms Pike urged employees to claim for all eligible deductions. “Make sure you claim working from home expenses if you’ve worked any hours from home.” The data shows 4% will use their tax return to pay off existing credit card debt. Few Aussies are in the mood to splurge with just 5% planning a holiday with the money, and 3% who plan to go shopping.
Top tips ahead of tax time:
Consider an accountant. If your finances are a little complex or you’re unsure whether you can claim something, consider working with an accountant to ensure your return is lodged correctly.
Lodge on time, but not too early. If you plan on doing your own tax return, you’ll need to lodge it before 31 October. On the flip side, lodging your return too early might mean missing important information and lodging an incomplete return.
Hold on to your receipts. You need to keep a clear financial record of anything you want to claim on. Without this, there’s no proof of purchase and you might not be able to get your money back.