Preparing our annual tax returns may not spark joy but knowing a refund is due can be the best incentive to lodge early. According to transactional data and consumer research gathered by Fonto from July to November 2021, 7 in 10 Australians had received a tax refund by the end of August - just eight weeks after the close of the financial year. With an average refund of $2,400, the next decision is what to do with the additional funds.
In 2020-21, 38% of tax refunds were saved and 13% invested, but only 4% were deposited into superannuation accounts. Considering the cumulative long-term benefits of investing additional funds into super, the percentage is surprisingly low.
Those who saved or invested their tax refunds tend to be more financially secure with a Financial Wellbeing Score of 65 against the Australian average of 54. If more of these refunds are directed to super accounts, their future may look even brighter.
Of the 39% who spent their tax refund, the extra cash went towards paying bills, car expenses, clearing a debt or buying food. Refund spenders tend to have a lower Financial Wellbeing Score (44 against the average of 54) suggesting they are under the most financial pressure and looking for relief. After providing good support through Covid-19, financial services companies could now assist customers more holistically through financial education and better support services.
