Australians planning to save tax cut earnings

Major bank National Australia Bank (NAB) has released its NAB Australian Wellbeing Survey Q1 report, revealing that 36 per cent of Australians are planning on saving the extra income they will be earning from stage 3 tax cuts rather than spending.

NAB surveyed more than 2,000 Australians in its NAB Australian Wellbeing Survey for the first quarter of the calendar year (ended 31 March) and found that 29 per cent of respondents believed that the tax cuts would support them with the increased cost of living.

The stage three tax cuts are set to come into effect from 1 July 2024 and will cut the lowest tax bracket rate from 19 per cent to 16 per cent and the second-lowest tax bracket rate from 32.5 per cent to 30 per cent.

The changes will also involve increasing the 37 per cent tax threshold from $120,000 to $135,000 and increasing the 45 per cent tax threshold from $180,000 to $190,000.

The tax cuts could save Australians between $350 and $4,500, depending on their tax bracket.

The most likely of those to save the extra income were Gen Z women, as 53 per cent of female Gen Z said they would save their income. Those earning between $100,000 and $150,000 were the second most likely demographic to save, with 49 per cent stating they would hold on to the extra income.

Only 8 per cent of respondents said they would spend the extra income on non-essentials. NAB found that 22 per cent plan to spend the extra income on paying off debts, with a further 12 per cent planning to invest.

Of those saving, one in three are using the money to save for a holiday, one in four to save for a home, and one in five for retirement. The major bank found that 77 per cent of respondents wanted to save more, and were, on average, aiming to have $17,000 in their savings accounts.

NAB revealed that household deposits at the bank have grown by 6.4 per cent over the last year.

Paul Riley, NAB’s personal banking executive said on the research: “Despite cost-of-living pressures, Australians have been prioritising their savings wherever possible over the last year or so. The money people expect to get back from stage 3 tax cuts will help supercharge their savings or rainy day funds.

“High-interest savings accounts can be a safe, smart and stable way to manage your money, providing ready access to funds if they’re needed, as well as a rewarding interest rate.”

Speaking on how Australians plan to spend the increased earnings, the executive said: “Many Australians are also keen to use the money from these tax cuts to give their household budgets, which are under pressure from the cost-of-living crunch, some much-needed breathing room.

“Fewer Australians are planning to splurge their tax cuts, which is welcome news in the fight against inflation.

“Australians continue to prove they’re more engaged with their finances than they have been for a long time, and it’s clear most are going to use this extra money to get ahead.”

[Related: Revised tax cuts pass both houses]