Almost one in two Aussies now attacking debt with tax refund

Perth 29 July 2014. Deciding what to do with your tax return is a no-brainer according to almost half the population, with an impressive 47.7% of Australians saying they plan to use their tax refund to pay off debt.

The sixth annual Bankwest Taxing Times Report, the latest addition to the Bankwest Financial Indicator Series revealed that reducing debt is top of the priority list for almost one in two (47.7%) Australians in 2014, a marked increase from just one in three (35.6%) during 2013.

This year’s data from Bankwest indicates increased conservatism in Australian spending, with growing personal savings the second priority after paying off debt. More than one in three Australians (35.6%) intend to put their tax refund towards savings, up noticeably from 2013 (31.5%).

Nationally only two in five Australians (43.5%) are expecting a tax refund this year, down from almost two in three (64.8%) in 2013.

“The number of Australians expecting a tax refund declined for the third year in a row. This is consistent with a high household saving ratio, which generates additional taxable income via the interest earned on savings," said Andrew Whitechurch, Bankwest Executive General Manager, Products & Marketing.

"The decline may also reflect respondents' incorrect belief that this year's Federal Budget will affect their 2013-14 tax return, when in fact the measures announced in May will apply to 2014-15 and subsequent tax years.”

Gen X are the most likely to use their tax refund to pay off debt (63.2%), while Pre-boomers are the most likely to save their tax refund (63.6%). These trends are indicative of each generation’s life stages, with Gen X typically having higher debt levels than Pre-boomers who are in retirement phase.

On the gender divide, slightly more women than men who are expecting a tax refund report that they plan to save their refund (36.7% vs 34.5%). Conversely, men are more likely than women to put their refund towards paying off debt (48.8% vs. 46.5%).

On average, men expect a greater tax refund than women ($2,744 vs. $1,763) however Mr Whitechurch says women could expect more from their refund.

“With more female than male respondents reporting they would claim no tax deductions, women may be missing out on getting a legitimate income tax refund. If any individual, man or woman, is unsure about what deductions they could be entitled to receive, I encourage them to seek advice before lodging their return.”

Overall, Australians are anticipating more money returned to their pockets at tax time this year with an increase on the average return to $2,275, up from $2,033 in 2013. NSW residents expect to receive the highest average tax return at $2,610, followed closely by QLD at $2,566.

Despite this anticipated increase in extra cash however, only 13.8% of Australians plan to spend their tax refund on something more exciting. Those who are willing to splurge look set to travel, with 77.3% reporting they are considering spending their tax return on a holiday.

When it comes to lodging tax returns, online self-completion of tax returns continues to gain traction with close to two in five (39.3%) Australians now submitting their tax return this way, compared to around one in three (34.7%) a year ago. Close to half (47.0%) of Australians still prefer an accountant to prepare their return, citing confidence in having their return lodged correctly (66.4%) as their primary justification.

Completing a tax return is a dreaded task for many Australians, with Bankwest’s Taxing Times Report finding the majority of Australians would prefer to dine with the in-laws (71.5%), clean the entire house (59.6%) or work on the weekend (55.6%) instead of filing their return.

Additional key findings:

Of those using their tax refund to pay off debt, credit card (57.9%) and mortgage (43.4%) are the leading priorities, followed by personal loans (10.5%)

West Australian residents expect the lowest tax refund at $2,057

Of those who are expecting to pay additional tax this year, the average amount anticipated is $3,408, down slightly from $3,539 in 2013

The majority (54.0%) of respondents who do their own tax return believe that is has become easier to do so over the years, up from 45.6% in 2013

Part of Bankwest’s Financial Indicator Series, the Bankwest Taxing Times Report assesses Australians tax return experiences and expectations. The research is carried out by CoreData via an online survey sent to Australians aged 18 years and over in May 2014. Nearly 1,100 individuals nationwide have been anonymously surveyed to assess their tax return in the sixth annual Bankwest Taxing Times Report 2014.

More detailed analysis, data and tables are contained within the Bankwest Taxing Times Report, which is available at www.bankwest.com.au

Source


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