The amount of tax that applies to the interest you earn on your savings account depends your overall taxable income.
The total income you earn each year determines the tax rate you must pay, and the ATO's tax rates for the 2025–26 financial year are shown below:
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
The above rates don't include 2% Medicare levy.
You need to add the amount of interest you've earned to your total earnings for the financial year, to see which tax bracket you fall into. You do not need to declare the money sitting in your savings account or bank account (this money has already had tax withheld on it).
You only need to declare the interest you've earned. Even if you've spent all the money you've earned in interest payments you still need to declare it.
Asad works in an accounting firm and earns an income of $95,000 for the financial year. He also earned $5,000 in interest in his high interest savings account. This interest will be added to his total income, meaning he'll have a taxable income of $100,000 for the year. The additional $5,000 in interest will be taxed 30%, or $1,500 (this does not include the Medicare Levy).
Under its rules regarding investment income, the Australian Taxation Office (ATO) requires all Australian residents to declare any interest they receive as income. This is because you've earned that money, in a similar way to you earning your salary or wages.
You must pay tax on any money earned throughout the financial year. This includes money earned from other investments too, like money made from selling shares or receiving dividends.
When you open a savings account, your bank will give you the option of providing your TFN. While it’s not compulsory to do so, supplying your TFN is in your own best interests.
If you haven’t given your bank your TFN, the bank must withhold an amount from the interest you earn and send it straight to the ATO. This withholding tax is calculated at the top marginal tax rate of 45% plus the Medicare levy of 2%. This is the case even if you should actually be in the bottom tax bracket. If you’re a non-resident of Australia, the bank generally withholds non-resident withholding tax on your interest instead, at 10% unless a tax treaty sets a lower rate.
If you’re a resident, you’re eligible to receive any overpaid tax back when you lodge your tax return.
"When it comes to bank interest, the ATO simplifies the tax filing process by pre-filling your tax return with data from financial institutions. This means any interest earned on your savings accounts is automatically reported to the ATO by your bank, reducing the need for manual entry and minimising errors. This pre-fill feature ensures that all your interest income is accurately included in your tax return, helping you stay compliant and avoid any potential issues. However, it's still important to review the pre-filled information to ensure its accuracy and completeness before submitting your tax return."
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1. So closed a savings account that I earned interest from in the middle of the financial year. My TFN was provided to the Bank for the said account. Will the interest details of this account still be pre-filled?
2. The interest I earn is lower than 18,000, and I’m a scholarship student who receives a stipend which is not taxed. So, my savings interest is the only taxable interest I have right now. do I still need to file for tax returns?
Hi Saku,
If you earned any income, including bank interest and regardless of the amount, then yes you need to lodge a tax return. Yes, this information is likely to be pre-filled.
My wife and I have some money we want to use to open a high interest savings account. Should we do this in her name only as she is the lower income earner?
Hi Mike,
We’re not licenced to provided personal financial advice, however based on the information you’ve shared, if she is the lower income earner, opening an account in her name would result in you paying less tax. So, that seems like a sensible approach. For professional advice, you should contact an accountant or the ATO.
Hope this helps!
I am retired and 64 years old i have a fortnightly income pension from my super plus I earn $18,200.00 a year.
I get about $3,000 in interest a year do i need to do a tax return please ?
Hi Chris, Yes as you have earned income, you are required to lodge a tax return.
my mum is a retiree and is being charged Withholding Tax on the Interest she earns from a savings account. Will it be refunded when tax return is submitted?
Hi Carlton,
Your mum is eligible to be refunded any overpaid tax when she lodges her tax return.
To avoid paying withholding tax, she can provide her tax file number to the bank.
I live overseas full time and I am not a resident of Australia. I have a savings account still in Australia from when I worked there and I get taxed 10% on my interests earned. Soon I will also be getting taxed on this interest from the country I reside in when I declare this account. My question is, will I continue to be taxed from Australia as well as the country I live in?
Hi,
It’s worth speaking with the ATO or a tax adviser to get personal advice based on your situation.
Thanks,
Alison