There’s no end to Australia’s cost of living crisis and our plans for tax refunds reveal just how bad things are getting.
Tax refunds hit by the cost of living crisis
Getting a tax refund is usually a time for a bit of a splurge – but this year, things are seeming 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.
An alarming 12% of us plan to use our tax refunds this year to pay for household bills, while 41%, equivalent to almost 8 million people, plan to stash their refunds in savings – a considerable jump from 35% in 2021.
The research also found that some will use their tax refund for mortgage repayments and credit card debt, while others who presumably might not feel the pinch as much will use it to fund a holiday and 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 splurging their tax returns this year.
“As the country heads into an economic downturn, many Australians are experiencing more financial pressure than ever. So 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%) invest in shares, pay off buy now, pay later (BNPL) debt or pay off a personal loan.
A further 1% will put it towards HECS debt, while 1% will invest in cryptocurrency.
Wages and savings
Ms Megginson reminded Australians that storing the extra savings is a great way to safeguard against unforeseen circumstances.
“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 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 regarding our cost of living crisis.
According to the research, 21% of employees were expecting a more considerable wage rise this year than they received in 2021 to offset surging inflation, which is predicted to hit 5.5% by mid-year and 6% by year-end.
The nationally representative survey of Aussie workers found that 22% of women and 20% of men expect a more significant pay rise than usual. In comparison, 44% don’t expect a pay rise at all, and 30% expect a similar pay rise to what they got last year.
Worryingly, 5% of Australian workers expect a decrease in pay despite cost-of-living pressures.
Rebecca Pike, a money expert at Finder, said millions of households had their budgets squeezed.
“Inflation is uncomfortably high, putting extra pressure on households who are still trying to get their footing after the pandemic,” She 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 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 radical action to save money and insulate themselves from further rises to inflation.
“Then any pay increase at work is the cherry on top.”
Standard purchases you can claim on your tax return
While some expense claims are well known, you may also be able to claim some lesser-known but common purchases, such as beauty products, depending on your line of work.
Items you might be able to claim on your tax return include earplugs if you work in construction or are an airport or factory worker.
Hair accessories, like hairnets, bobby pins and hair ties, could also be claimed if you are a kitchen hand or baker and are required to keep hair in place and out of food.
Workers who often travel, such as long-haul truck drivers, may also be able to claim the cost of their meals if their employer provides no meal allowance.
Other everyday items you could claim include sunglasses, sunscreen and hats if you are a landscaper or builder whose work involves spending most of the day in the sun.
Flight attendants may also claim hydrating cosmetics to combat the lack of humidity on flights, and makeup artists can claim the cost of beauty products used on their clients.
Anyone required to do a COVID rapid antigen test to be able to go to work can claim the cost of the test.
Similarly, some workers, especially medical practitioners, cleaners, and hospitality and retail workers, could claim the cost of hand sanitiser if their work requires physical contact or being near customers.
Any employee required to wear a face mask at work, where the employer did not provide the mask, can also claim the mask as personal protective equipment.
However, with so many expenses to claim, we recommend holding onto receipts for five years from the date the tax return is submitted in case of a tax audit.
Vogue Advisory Group – helping you reduce the cost of living and increase tax returns
Please contact us for assistance if you need advice on the cost of living or tax returns.