Colonial First State (CFS) has surveyed 2,000 Australians to determine their tax-saving intentions following changes to personal income tax announced in the budget on 6 October.
As part of the measures to personal income tax, Treasurer Josh Frydenberg declared tax cuts worth nearly $30 billion would be made available to more than 11 million individual taxpayers two years earlier than previously legislated.
Stage 2 of the Personal Income Tax Plan, legislated to apply from 1 July 2022, will now take effect on 1 July 2020. The upper threshold of the 19 per cent tax bracket will increase from $37,000 to $45,000, and the upper threshold of the 32.5 per cent tax bracket will increase from $90,000 to $120,000.
Further, low- to middle-income earners will receive additional support through an increase in the low-income tax offset (LITO) from 1 July 2020 from $445 to $700 as well as access to the low and middle-income tax offset (LMITO) for 2020–21.
According to the research by CFS, the majority of Australians intend to put the cut to personal income tax towards their savings. Sixty-six per cent of those surveyed aged between 18 and 24 said they planned to save some or all of the tax cut, versus 57 per cent of Australians overall.
Of the 22 per cent of Australians who intend to spend their tax cut, 33 per cent said they are going to put it towards essentials such as bills, groceries and insurance.
Almost one in five indicated that they plan to use their tax cut to reduce their mortgage, and 16 per cent will use it to invest in the stock market.
A further 11 per cent of Australians said they plan to use their tax saving to pay off high-interest debt such as credit card and buy now, pay later accounts.
Meanwhile, just 6 per cent of those surveyed indicated that topping up their super or retirement savings was a priority. This is despite 16 per cent of respondents having withdrawn super as part of the government’s early release of super scheme.
“For many Australians hit hard by the coronavirus-led recession, the personal income tax cuts brought forward by the government in this year’s federal budget have been well received, alongside a range of other measures, as much-needed support,” said CFS general manager Kelly Power.
“We know that a lot of Australians have been doing it tough and the focus for many has been on navigating the current uncertainty. As we begin to emerge on the other side of the pandemic, with infection rates falling and the economy restarting, it’s important to start thinking about the future, including protecting and rebuilding wealth.
“Whether Australians decide to save or spend, it’s about being savvy about what you use the extra cash for. A little can go a long way, and if used wisely, the income tax cuts can provide an additional boost to your overall financial position.”