A survey by Colonial First State found 57% of the 11 million Australians receiving their 'Stage two' personal income tax cuts - the equivalent of almost $40-$50 a week extra for low and middle-income earners - planned to save it.

Comparatively, only 22% said they intended to spend the extra money, despite the rationale for bringing forward the tax cuts being to stimulate spending and boost economic recovery. 

Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest non-introductory and introductory interest rates on the market.

Rates
Features
Conditions
Other
Provider
4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • A high-interest online savings account with no monthly fees, easy withdrawals and award-winning digital banking
  • No withdrawal notice periods or interest rate penalties
  • Save up to 10% on eGift cards at over 50 retailers with Macquarie Marketplace
Disclosure

Savings Account

  • A high-interest online savings account with no monthly fees, easy withdrawals and award-winning digital banking
  • No withdrawal notice periods or interest rate penalties
  • Save up to 10% on eGift cards at over 50 retailers with Macquarie Marketplace
More details
Disclosure
400$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Special offer: Savings Accelerator (Kick Starter offer).
  • For a limited time, new ING customers can get a bonus 0.70% p.a. on their savings rate on balances of $150,000 up to $500,000 for the first 4 months. T&Cs apply.
  • If your balance is over $500,000 (but less than $5 million) you will earn the ongoing variable rate of 4.7%
Disclosure

Savings Accelerator

  • Special offer: Savings Accelerator (Kick Starter offer).
  • For a limited time, new ING customers can get a bonus 0.70% p.a. on their savings rate on balances of $150,000 up to $500,000 for the first 4 months. T&Cs apply.
  • If your balance is over $500,000 (but less than $5 million) you will earn the ongoing variable rate of 4.7%
More details
Disclosure
000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Set up your Pay Cycle and connect your accounts from over 140 financial institutions.
  • Retrace your spending steps into categories with Spending Footprint.
  • No monthly or international fees on any of your transactions.
Disclosure

Save Account

  • Set up your Pay Cycle and connect your accounts from over 140 financial institutions.
  • Retrace your spending steps into categories with Spending Footprint.
  • No monthly or international fees on any of your transactions.
More details
Disclosure
010000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Earn up to 5.20% pa by depositing $1,000 in the previous month
  • No account fees
  • Easy access to your money

AMP Saver Account

  • Earn up to 5.20% pa by depositing $1,000 in the previous month
  • No account fees
  • Easy access to your money
More details
010000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Deposit at least $1,000+ each month from an external source
  • Make 5 or more eligible transactions. Grow your savings balance each month
Disclosure

Savings Maximiser

  • Deposit at least $1,000+ each month from an external source
  • Make 5 or more eligible transactions. Grow your savings balance each month
More details
Disclosure
  • Set up your Pay Cycle and connect your accounts from over 140 financial institutions.
  • Retrace your spending steps into categories with Spending Footprint.
  • No monthly or international fees on any of your transactions.

More details
Important Information and Comparison Rate Warning

All products with a link to a product provider’s website have a commercial marketing relationship between us and these providers. These products may appear prominently and first within the search tables regardless of their attributes and may include products marked as promoted, featured or sponsored. The link to a product provider’s website will allow you to get more information or apply for the product. By de-selecting “Show online partners only” additional non-commercialised products may be displayed and re-sorted at the top of the table. For more information on how we’ve selected these “Sponsored”, “Featured” and “Promoted” products, the products we compare, how we make money, and other important information about our service, please click here. Rates correct as of December 21, 2024. View disclaimer.

Important Information and Comparison Rate Warning

Nearly a fifth (17%) meanwhile said they would put the extra money towards their mortgage repayments - good news perhaps for mortgages still in deferral - while 16% planned to invest in the stock market with it.

Only 11% said they planned to use their tax savings to pay off high interest debt such as credit card and buy now pay later accounts.

Colonial First State General Manager Kelly Power said the tax cuts would still provide a much-needed boost to the economy.

"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," Ms Power said.

“We know that a lot of Australians have been doing it tough and the focus for many has been on navigating the current uncertainty.

"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."

However, Ms Power also said Australians should begin to think about rebuilding their wealth moving forward.

Rebuilding super not a priority 

2020 has been a tough year for superannuation, with the government's early access to super scheme in response to the coronavirus seeing more than $35 billion withdrawn at the time of writing. 

More than 3.4 million different Australians have used the scheme at an average of $7,400 each, and over the June quarter, the total value of Australian super assets fell for the first time as Aussies raced to raid their retirement funds. 

While most withdrawals were made out of necessity, others did so to spend on discretionary items like clothing, to pay off debts, or even to fund gambling expenditure. 

Despite 16% of respondents admitting to withdrawing from their super, only 6% of respondents said they planned to use their extra income to top up their super, making it the least popular option. 

“The research indicates that those who have needed to access super early as a way of surviving income loss, particularly younger Australians, are not making rebuilding their superannuation a priority," Ms Power said. 

“As we begin to emerge on the other side of the pandemic, it’s important to start thinking about the long-term impact your super withdrawal could have on the quality of your retirement."

In its super withdrawal estimator calculator, ASIC's MoneySmart found someone withdrawing $10,000 in their twenties could result in them being up to $25,000 worse off when they retire at 67. 

Withdrawing the full $20,000 would make them $50,000 worse off. 

$10,000 early super withdrawal

Age

Years to 67

The estimated reduction in balance

20

47

$26,436

30

37

$21,516

40

27

$17,512

50

17

$14,253

Source: ASIC Moneysmart

"Seemingly small decisions now could have a big effect on the kind of retirement you’ve always dreamed of," Ms Power said. 

“Everyone’s circumstances are different so whether you decide to spend it, use it to pay down debts, build up savings or make super contributions, it’s important Australians put the money towards what matters to them."

Photo by Caleb Martin on Unsplash