Few plan to spend tax returns as economy stalls

Just one in 20 Australians plan to splurge on big-ticket items when their tax returns come through, with most opting to squirrel them away or pay down debt.

Amid acute cost of living pressures and a string of interest rate rises, surveying by Compare the Market found most people intended to bank their tax returns.

The comparison site survey found 40 per cent planned to funnel their tax return straight into their savings account, while one in five said they would pay off debt.

About 15 per cent of respondents expected to use the money for their day-to-day expenses.

Millennials and Gen Xers were the most likely to be paying off debt, according to the survey, with many still making mortgage payments.

Compare the Market’s Chris Ford was not surprised most households planned to hang onto their tax-time cash injection or pay down debt.

“Saving some cash with the prospect of an economic downturn is definitely a safe play Australians should be considering,” Mr Ford said.

Higher consumer prices and interest rate rises were eating into household budgets, he said.

Separate data released by the Reserve Bank last week suggests more households are reaching for credit cards to make ends meet.

In May, total debt from personal credit cards attracting interest reached its highest level since August 2021, lifting by $3.5 million to $17.77 billion.

In another blow to taxpayers, the Australian Taxation Office has warned returns may be smaller this year and more people than usual may owe money.

One reason is the end of the low-and middle-income tax offset, which could shrink returns by as much as $1500 for those earning less than $126,000.

The offset was never meant to be permanent and although it was extended a few times during the pandemic, it lapsed at the end of 2021/22.

Poppy Johnston
(Australian Associated Press)