Buying shares and 5 other ways investors intend to spend tax cuts: report

One in five investors intends to spend their tax-cut savings buying shares, according to a survey of more than 2,000 Australian investors conducted by online trading platform, Stake.

Let’s find out what other investors intend to do with the extra money in their pay this month.

1 in 5 investors will put tax-cut savings into shares

Stage three tax cuts began this month. Every worker will receive a bit more in their pay following amendments to the original stage three tax cut plan.

The tax cuts will see a worker earning $55,000 per year saving $1,054 per annum in tax. A worker earning $140,000 per year will save $3,729 per annum in tax. You can check out the new tax rates here.

Stake’s survey showed most investors, or 31%, intend to use their tax-cut savings to help them with the cost of living.

Following 13 interest rate rises between May 2022 and November 2023, and indicators this month that inflation may prove stickier than expected, households are under significant pressure.

A further 31% of investors intend to save the extra cash for a rainy day or emergencies.

Here at The Fool, we suggest investors always have an emergency fund to cover unexpected expenses. This avoids having to sell assets like ASX shares at inopportune times to cover urgent expenses.

Another 24% of investors intend to pay off debts. The Fool distinguishes between ‘good’ and ‘bad debts’. Bad debts are short-term debts not associated with investment, like interest on credit cards.

Other ideas for the extra cash

As mentioned earlier, one in five investors, or 21%, intend to buy shares. The survey also revealed the five most popular ASX shares purchased by investors, which are listed below.

The survey results reflect Australians’ ongoing love of travel.

About 19% of respondents intend to use their extra cash to fund holidays and travel. This was the only discretionary expense featured in the top six responses.

Finally, 19% intend to use their additional income to save for retirement.

Some might use their tax cuts to make concessional contributions to superannuation, which would give them further tax savings.

This is because contributions are taxed at 15%, which is well below most people’s marginal income tax rates. You can learn about how to save tax through superannuation here.

Top 5 ASX shares among survey respondents

The survey found the five favourite ASX shares among investors comprised four exchange-traded funds (ETFs) and an ASX lithium share.

Here they are.

1/ Vanguard Australian Shares Index ETF (ASX: VAS) 

The Vanguard Australian Shares Index ETF is an index-based ETF that tracks the performance of the S&P/ASX 300 Index (ASX: XKO).

2/ iShares S&P 500 ETF (ASX: IVV)

The iShares S&P 500 ETF is an index-based ETF that tracks the 500 largest companies comprising the US S&P 500 Index (SP: .INX).

3/ Vanguard Msci Index International Shares ETF (ASX: VGS)

The Vanguard Msci Index International Shares ETF tracks the return of the MSCI World ex-Australia (with net dividends reinvested). This means exposure to about 1,500 companies from 23 developed countries.

4/ Betashares Nasdaq 100 ETF (ASX: NDQ)

The Betashares Nasdaq 100 ETF tracks the performance of the tech-heavy NASDAQ-100 Index (NASDAQ: NDX).

5/ Pilbara Minerals Ltd (ASX: PLS)

Pilbara Minerals has lost 41% of its value over the past 12 months due to plunging commodity values.

The post Buying shares and 5 other ways investors intend to spend tax cuts: report appeared first on The Motley Fool Australia.

More reading

• Is it time to dive back into ASX lithium shares?
• Buy this ASX lithium stock and sell this one
• The 5 most popular ASX shares bought by investors
• Own iShares S&P 500 ETF (IVV) units? It’s payday for you!
• This top broker thinks Pilbara Minerals shares are done falling

Motley Fool contributor Bronwyn Allen has positions in Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Nasdaq 100 ETF and iShares S&P 500 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Vanguard Msci Index International Shares ETF and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.