Small businesses will have to offer great deals to consumers to persuade them to part with their upcoming tax returns, with just 18% actively seeking to purchase something “exciting” rather than save, according to a new report.
Bankwest recently released the results of its annual Bankwest Taxing Times Survey, which surveyed 818 Australian taxpayers across all states and age groups.
The report reveals 81% of respondents expect to receive a tax refund this year, while 6% expect to pay tax and 13% expect to break even.
The research indicates that the average tax refund across the country is expected to be $2,317 this financial year, down 6% from last year.
According to the survey, 42% of respondents plan to pay down their debt with this year’s tax return, while 31% said they plan to save their tax return.
Meanwhile, 16% of taxpayers plan to spend their return on essential living, while 18% will spend their return on something “exciting”. Within this last statistic, 56% plan to spend their return on holidays, while 34% will splurge on electronics.
Bankwest senior analyst Tim Crawford says there has been a slight pickup in people spending their tax return as they look to take advantage of the strong Australian dollar, hence the high proportion of taxpayers planning to spend their return on holidays.
Crawford says businesses need to ensure they are available to capture these funds via their promotions.
“It’s about value; people spending are looking for value, so businesses wanting to grab a portion of the tax refund pool need to convince consumers they’re getting a good deal,” he says.
Bankwest retail chief executive Vittoria Shortt says while there is an opportunity for businesses to take advantage of taxpayers’ spending intentions, the figures aren’t strong.
“We have seen marginal growth in the number of taxpayers who anticipate spending their refund either on something exciting or on living expenses,” she says.
“It appears that people are using tax time as a catalyst to get their finances in order, with the majority of taxpayers using their refunds to pay down debt or to save.”
“Taxpayers are becoming more prudent with their returns and, subsequently, there’s an encouraging trend developing, with the number of people deciding to save their tax refund increasing for the second year running.”
The research reveals NSW taxpayers expect the highest tax refund, recording an average of $3,225, followed by South Australia, Victoria, Queensland and WA.
Generation X taxpayers are expecting the largest refund ($2,821), although half plan to use the money to pay off debt; the highest of all generations.
Retirees are anticipating the smallest refund ($1,743) and also have the highest percentage, compared to other generations, of people planning to save their refund or spend it on essential living expenses.
The report also reveals the intentions of SMEs, as 15% of the respondents were SME owners. 31% are looking to invest their tax return back into the business, while 18% plan to pay off business debt.
“Cashflow is an important part of the equation; many small businesses are calling out for a cash boost for their company,” Crawford says.