Grim plan for 2022 tax refunds revealed as cost of living crisis explodes

There’s no end in sight for Australia’s cost of living crisis – and our plans for our tax refunds reveal just how dire things are getting.

Getting a tax refund is usually a time for a bit of a splurge – but this year, things are looking very different as Australia’s cost of living crisis hits households hard.

New research by comparison site Finder has revealed many Aussies are now just scraping by as inflation continues to soar.

In fact, an alarming 12 per cent of us plan to use our tax refunds this year to pay for household bills, while 41 per cent, equivalent to almost 8 million people, plan to stash their refunds in savings - a huge jump from 35 per cent in 2021.

The research also found some will use their tax refund for mortgage repayments, and credit card debt, while others who presumably might not be feeling the pinch as mush will use it to fund a holiday and to go shopping.

Sarah Megginson, senior editor of money at Finder, said it’s promising to see how many Aussies are planning to save instead of splurge their tax returns this year.

“As the country heads into an economic downturn, many Australians are experiencing more financial pressure than ever before. They’re looking to use that extra cash to pay off outstanding bills and debts,” she said.

“On the other hand, many of us have worked hard throughout the year and are hoping to use the spare funds to go on a much needed vacation or use towards retail therapy.”

The survey found a small percentage of respondents – 4 per cent – will invest in shares, pay off buy now, pay later (BNPL) debt or pay off a personal loan.

Australians have grim plans for their tax refunds this year. Picture: iStock

A further 1 per cent will put it towards HECS debt, while 1 per cent will invest in cryptocurrency.

Ms Megginson reminded Australians storing the extra savings is a great way to safeguard against any unforeseen circumstances that might occur.

“We’re in an economic crisis with household expenses soaring, people struggling to afford rent and mortgage repayments, and energy bills doubling in certain states,” she said.

“I’d encourage people to think really carefully about what they do with the extra money they’re given and consider using it towards consolidating debt, getting on top of any outstanding bills, or stashing it into a savings account.”

Meanwhile, new Finder research also revealed one in five Aussie workers were banking on pay rise relief this year, with households looking to their employers for help when it comes to our cost of living crisis.

According to the research, 21 per cent of employees were expecting a larger wage rise this year than they received in 2021 to offset surging inflation, which is tipped to hit 5.5 per cent by mid year and 6 per cent by year’s end.

The nationally representative survey of Aussie workers found 22 per cent of women and 20 per cent of men expect a larger pay rise than normal, while 44 per cent don’t expect a pay rise at all, and 30 per cent expect a similar pay rise to what they got last year.

Worryingly, 5 per cent of Australian workers are expecting a decrease in pay despite cost-of-living pressures.

Rebecca Pike, money expert at Finder, said millions of households were having their budgets squeezed.

“Inflation is uncomfortably high putting extra pressure on households who are still trying to get their footing after the pandemic,” she said, and warned that high inflation could last for years not months.

“The rise in the price of borrowing will intensify the cost-of-living squeeze for households with a mortgage,” she continued.

“All of these factors have sharply intensified households’ need for more money and the first place they look is their pay cheque.”

Ms Pike urged employees to negotiate a pay rise at their annual review.

“There are plenty of ways to reduce expenses right now to ease the pressure – from cancelling streaming subscriptions to refinancing to a cheaper home loan,” she explained.

“Households can be taking some radical action to save money and insulate themselves from further rises to inflation.

“Then any pay increase at work is the cherry on top.”

Originally published as Grim plan for 2022 tax refunds revealed as cost of living crisis explodes