The lazy tax costs many Australians hundreds of dollars each year. Thankfully, it is a tax that you can avoid paying.
What is the lazy tax?
The ‘lazy tax’ is a form of financial penalty consumers pay for not regularly shopping around, negotiating, and upgrading to the best new deal on everything from utility bills to phone, internet, home loans, and insurances. You may be paying extra money unnecessarily for many of these items, simply because you haven’t shopped around.
Clearly this is not an official tax, it’s the price we pay for complacency. Many Australians tend to choose a supplier/provider and then take a set and forget approach to paying bills and instalments without going back to review or do comparisons.
This applies to a range of services such as:
- Home Loans
- Health Insurance
- Phone/ Internet
- Life, Income Protection and Trauma Insurance
- Car, Home & Contents Insurance
While it may seem silly not to try find a better deal, the time it takes to shop around can sometimes outweigh the benefit that you might gain. Some consumers also don’t mind paying a bit more for the convenience of not having to change providers. Some consumers still have loyalty towards brands or do not know or trust some of the new entrants into these markets and therefore would prefer to stay with what they know and trust.
Financial experts have estimated that this “loyalty tax” or “lazy tax” as it’s sometimes called is costing Australians $3.6 billion a year.
Finding a good deal isn’t always worthwhile
Negotiating a new deal can be stressful and time consuming. Some of the providers make their rates and offers so confusing that it makes it hard to compare and figure out if you are in fact paying more. Comparing apples with apples can sometimes be quite tricky but setting aside some time to do the job may save you significant amounts annually.
There have been reforms that was meant to make comparing simpler, for example, all advertised discounts on electricity must be off the same starting price. There are several comparison sites that have popped up over the years, however the deals they promote are not necessarily the cheapest, they often tend to favour the ones that give them the most commission.
The confusion surrounding more complex products, such as health insurance and home loans, can be overwhelming. There are many variables to consider, and the fear of incurring new waiting periods with a different policy can be off-putting. Therefore, changing providers is often a task that’s thrown into the too-hard basket – where it stays indefinitely.
How to avoid paying the lazy tax?
To avoid paying the lazing tax we recommend taking the following steps:
- Schedule a provider review around tax time. Since you are most likely going to be getting your paperwork ready for end of financial year. This should include everything from your phone bills, insurance, and household utilities.
- If you see a special offer advertised, approach your current provider to see if they can match it or maybe even beat it.
- Check the terms and conditions to ensure there are no surprises and that you are comparing like for like. If you take up a special offer, ensure the terms are suitable to your current situation.
How to assess if you are paying a lazy tax?
Ask yourself two simple questions.
- Have I reviewed or considered the arrangement I have in place regardless how significant or not in the last 2 years?
- Have I experienced any changes in my life circumstances?
If you answered yes to the above questions, now is the time to act.