Australians are continuing the trend of being sensible with cash and paying down debt as millions of taxpayers resist using their tax returns on a spending spree.
With the 2013/14 financial year beginning today many Australians will start to prepare their tax returns in the coming weeks and about three in five people will either use their refund to pay off debts or will save it, research found.
The survey, by RateCity, showed 40 percent of respondents plan to use their refund to pay down debt and another 23 percent intend to save it, which was not good news for retailers. Only 3 percent of respondents are planning to spend all of their tax refund.
Alex Parsons, chief executive of RateCity, said Aussies are continuing to take a cautious approach to their cash.
He said a good way to use a refund was for home loan customers to put the funds straight on to their mortgage.
“By putting a $2000 lump sum on a $300,000 mortgage it can save almost $7000 in interest and reduce a home loan term by four months,” he said. “And if $2000 was added as a lump sum every year, borrowers could save $77,000 and cut their 30-year loan term by almost six years.”
RateCity found that by adding a $2000 tax refund to a typical credit card debt of $3000 and the average purchase rate of about 17 percent, cardholders could potentially save almost $5000 in interest.
Savers could benefit from adding their refund to a savings account, adding around $1430 in interest over five years by adding a $2000 return every year to an account paying 4.4 percent, RateCity found.
Tammy May, director of MyBudget, said tax time was a good opportunity for Australians without savings to put aside a pool for a rainy day.
“One of the greatest causes of credit overuse and unmanageable debt is a lack of savings,” she told News Ltd.
“Savings provide a financial safety net in case of unexpected expenses such as a car breaking down or the washing machine needs to be replaced or a sudden change of income.”
“Be sure to keep it in a separate bank account so you won’t be tempted to make withdrawals.”
The Australian Taxation Office expects more than 12.4 million Australians to lodge their income tax returns for the last financial year. Australians have until October 31 to lodge their return or register with a tax agent.