How we spent last year’s tax cuts: Not what the retailers wanted
Millions of Aussies enjoyed $1000-plus tax rebates last year but new research shows it was not spent in the way the government and retailers were hoping.
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Billions of dollars handed out in tax cuts last year failed to flow to retailers as Australians instead squirrelled it away or used it to pay bills, new data suggests.
Retail trade dropped 0.5 per cent in December after a strong November, according to the Bureau of Statistics, while Reserve Bank governor Philip Lowe last week said households had scaled back their spending and had used higher tax refunds to pay more off mortgages.
A new survey by comparison website money.com.au found just five per cent of Australians who received tax refunds spent it on shopping.
In contrast, one third of people saved it, 28 per cent paid bills and 22 per cent paid off debt.
Households were battling rising costs in areas including petrol, health insurance and electricity, Money.com.au spokeswoman Helen Baker said.
“All of these everyday items that people need have been increasing and yet we haven’t seen wage growth,” she said.
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Ms Baker said people were uncertain about the future and were parking money for protection “in case something goes wrong”.
Tax cuts of up to $1080 for more than 11 million Australians were payable in lump sums through tax returns last year, and a similar handout is due this year.
Ms Baker said good ways to use tax refunds included paying off credit card debt, starting an investment plan or contributing to superannuation if you qualified for the government’s $500 super co-contribution.
The lack of retail and economic stimulus from 2019’s tax cuts gives the government less incentive to hand out bigger tax cuts this year.
The principal of Mr Taxman, chartered accountant Adrian Raftery, said because people filed their tax returns and received refunds at different times, retailers had not been able to excite them with big campaigns like they did during the GFC cash handouts a decade ago.
“Australians have a lot more debt now and are paying off a lot more,” he said.
As for spending tax refunds, Dr Raftery said the super co-contribution offered a “risk-free return on your money” of 50 per cent to low and middle-income earners who qualified.
And pay off high-interest debt first, Dr Raftery said.
“You’ll probably get 0.1 per cent (on savings) in a bank account but credit card rates are up to 24 per cent,” he said.
WHAT WE DID WITH TAX REFUNDS
• Saved it 33 per cent
• Paid bills 28 per cent
• Groceries and household costs eight per cent
• Paid down mortgage seven per cent
• Reduced ATO debt seven per cent
• Paid down credit card debt six per cent
• Spent at retail stores five per cent
• Leisure activities five per cent
• Paid down personal loan two per cent
Originally published as How we spent last year’s tax cuts: Not what the retailers wanted