27 September 2023

Tax refund critical for Aussies struggling with cost of living

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The cost-of-living crisis means cash-strapped Aussies are depending on their tax refund to pay everyday bills, writes Graham Cooke*.

As the end of the financial year approaches, a new study shows more Aussies than ever are heavily reliant on their tax refund, with a significant portion of the population even considering this annual cash injection as critical to their financial well-being.

The new Finder survey revealed 12 per cent of Australians – equivalent to approximately 2.4 million people – considered their 2023 tax refund to be critical to their financial health.

A further 23 per cent of respondents said the end-of-financial-year tax refund was very important to their budget.

How each generation is coping with soaring cost of living

Previous research from Finder also showed how each generation was dealing with cost-of-living pressures.

It showed that the inflationary crisis was more heavily affecting young Australians, with 70 per cent of Gen Z and 60 per cent of Gen Y feeling financially stressed, versus only 29 per cent of Baby Boomers.

A similar finding is revealed in this more recent research, with Gen Z (47 per cent) and Gen Y (49 per cent) far more likely to say their tax refund is either very important or critical to their financial well-being.

These findings support the reality that the cost-of-living crisis affects younger renters most heavily, even though media attention typically gravitates toward homeowners each time the cash rate increases.

But one potential positive is that we may be nearing the end of this inflationary period.

Finder’s panel of economists predict a maximum of two more cash rate rises before the rate peaks.

April’s inflation figure of 6.8 per cent, while an increase on last month, is still significantly below December’s peak of 8.4 per cent.

The smart move for your tax refund: Savings

Savings are a good representative for consumer ability to deal with higher prices, which makes data from the next finding somewhat concerning.

When questioned about their plans for the tax refund, 36 per cent of participants said they intended to lodge it into a savings account – a decrease from the 41 per cent who planned to do the same in 2022.

But there is excellent value to be found for savvy savers looking to make their money work for them.

Savings accounts are providing unprecedented value right now, with a market average of 4.2 per cent, which is the highest since July 2013.

And, with a bit of research, Aussies can accrue even more with three lenders – ING, Great Southern Bank and MOVE Bank – which are offering an ongoing 5 per cent or more on their standard savings accounts.

The best rate available also tends to fluctuate among different brands.

Savers can therefore use a strategy to remain ahead of the game by opening multiple savings accounts (free) and moving funds periodically to whichever bank offers the most attractive rate – you can find this out on Finder – to make your tax refund earn even more money.

*Graham Cooke, Head of consumer research at Finder.

This article first appeared at au.finance.yahoo.com

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