Budget fails to incentivise Aussies to save: savings tax scrapped
Aussies looking for a reason to save have been dealt another blow with last night’s budget, which failed to deliver the savings tax windfall promised two years ago.
Savers were due to receive a 50 per cent tax discount on up to $1,000 of interest, including interest earned on deposits, bonds, debentures and annuities, however the cut did not make it into Swan’s Big Budget.
According to RaboDirect, the lack of a tax break, coupled with the fact that deposit rates are falling, could act as a disincentive for Aussies to save.
RaboDirect’s Executive General Manager of Australia and New Zealand, Greg McAweeney, said:
“It is very disappointing that the Government has failed to deliver on the promise of a tax-break for savers, which had been on the cards for two years now. The 5.7 million depositors that were set to benefit from the discount have been short changed. Australians have been doing the right thing by reducing their personal indebtedness in times of economic uncertainty and let’s not forget the losses people suffered in their superannuation holdings.
“Times are still very uncertain – you only need to look at falling deposit rates and turbulent global equity markets to see this – and savers and investors should be given incentives to build their wealth by saving. Aussies should be encouraged to do the right thing to balance their household budget, not be turned off doing this.
“Apparently the government thought the savings tax scheme was too complex but it doesn’t seem fair that consumers are disadvantaged for doing the right thing. Any income that comes from interest on savings, bonds or annuities will be treated as the least favourable asset class when it comes to tax time. That doesn’t spell encouragement for savers.
“In the past few years we have certainly been saving more but unfortunately people are still putting the bulk of their money into the wrong accounts. As a result, RaboDirect has found Aussies are missing out on more than $4 billion in unpaid interest a year by keeping their surplus savings in low-interest bearing accounts.”