Retailers relying on consumers’ tax refunds to boost sales could be in for a shock, with a Bankwest report revealing 31% of Australians expecting to receive a tax refund intend to save it.
The fourth Bankwest Taxing Times Report, based on a survey of 800 individuals nationwide, shows a further 39% of Australians expecting to receive a tax refund will use it to pay off debts.
The average expected tax refund across the country has fallen to $2,017 for the 2011-12 financial year, down 13% from last year ($2,317) and 18% from 2010 ($2,473).
More than half (53%) of the survey respondents who expect to receive a refund believe they will receive less than $1,000, while only 7% expect to receive a payment of more than $5,000.
According to Bankwest Retail chief executive Vittoria Shortt, the results support the findings of the Bankwest Financial Fitness Index, released in March.
“[The index] found half of all respondents have changed their spending habits over the year, becoming more conservative,” Shortt said in a statement.
Meanwhile, the Bankwest Taxing Times Report found that for those looking to pay down debt, close to two thirds (63%) plan to pay off credit card debt as a priority.
More than a third (34%) plan to reduce their mortgage, while 9% intend to pay off personal loans.
Only 15% of Australian taxpayers plan to “live it up” and spend their refund on something more exciting, down from 18% from last financial year.
Of these, 69% have chosen to use the money for a holiday, while 20% plan to revamp their wardrobe.
Nearly one-fifth (19%) of respondents anticipate spending their tax refund on basic commodities such as food or utility bills. This represents a slight increase on last year’s figure (16%).
“Ongoing economic uncertainty… and the rising cost of energy and food has seen an increase in the number of Australians planning to spend their refund on basic commodities,” Shortt said.
According to the report, the average expected tax refund for the pre-boomers generation has jumped from $1,743 last financial year to $2,947, suggesting this age bracket is one to focus on.
In contrast, the younger generations’ expectations have fallen over the financial year, with Gen Xers and Gen Ys expecting average returns of $2,160 and $1,400 respectively.
Both expectations are considerably lower than that recorded last year ($2,822 and $1,937).
By state, Victorian taxpayers are expecting the largest tax refund ($2,348), which is an increase of 17% on the $1,940 return expected last year.
NSW and ACT taxpayers reported the biggest drop in expected tax refunds year-on-year, with an average expected return of $1,730, compared to $3,225 in 2010/11.
The news comes on the back of the latest Consumer Credit Expectations Survey from Dun & Bradstreet, which shows six in 10 Australians are concerned about their financial situation.
According to the survey, 69% of those earning less than $50,000 annually, and 62% of consumers aged 50-64, are worried about their personal financial wealth.
One in four low-income households, and one in five older Australians, admits to having no savings, despite almost one-third indicating they are refocusing their attention towards saving.