When is term deposit interest taxable

Paying tax on term deposit interest

You need to pay tax on the interest you earn on a term deposit.

If you’ve invested money in a term deposit, you will need to pay tax on the interest income you earn. The amount of tax you'll need to pay on your term deposit interest will depend on your overall taxable income, and it will also depend on when you receive your interest payments.

This guide will outline when term deposit interest is taxable, how much tax you'll pay on your interest and how you can make sure you meet all your obligations when declaring your tax. You can also compare current term deposit rates.

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Term deposits you can compare today

Rates last updated August 16th, 2018
$
Name Product 3 Mths p.a. 4 Mths p.a. 6 Mths p.a. 12 Mths p.a. 24 Mths p.a. 36 Mths p.a. Min Deposit Interest Earned
Citibank Term Deposit
2.60%
-
2.80%
3.00%
-
-
$100,000
UBank Term Deposit Account
2.60%
2.70%
2.75%
2.64%
-
-
$1,000
Bank Australia Term Deposit Account
1.15%
1.15%
1.55%
1.85%
2.15%
2.35%
$500
Bank Australia Term Deposit Account 5000+
2.20%
2.20%
2.60%
2.85%
2.95%
3.00%
$5,000
MyState Bank Online Term Deposit
2.50%
2.35%
2.55%
2.70%
2.80%
-
$5,000
Firstmac Term Deposit
2.55%
-
2.75%
2.65%
2.75%
-
$5,000
AMP Term Deposit $25,000+
2.55%
2.60%
2.80%
2.85%
2.95%
3.00%
$25,000
AMP Term Deposit $100,000+
2.55%
2.60%
2.80%
2.85%
2.95%
3.00%
$100,000
AMP Term Deposit $5000+
2.35%
2.40%
2.60%
2.65%
2.75%
2.80%
$5,000
BCU Term Deposit
1.25%
0.71%
1.40%
1.45%
2.55%
1.80%
$1,000

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Is term deposit interest taxable?

As an Australian resident, you must pay tax on all the income you receive each year, including interest income earned from savings accounts and term deposits. So if you’ve been paid interest on a term deposit in the past financial year, you’ll need to declare that amount on your next tax return.

Here's how much tax you'll pay on term deposit interest

The interest you earn on your term deposit will be added to your total taxable incomes, and taxed at the same marginal tax rate that applies to the rest of your income. The table below shows the ATO’s marginal tax rates for the current financial year.

Taxable incomeTax you must pay on this income
$0 to $18,200Nil
$18,201 to $37,00019c for each $1 over $18,200
$37,001 to $87,000$3,572 plus 32.5c for each $1 over $37,000
$87,001 to $180,000$19,822 plus 37c for each $1 over $87,000
$180,001 and over$54,232 plus 45c for each $1 over $180,000

You need to declare term deposit interest in the financial year you receive the interest payments.

If your term deposit has a term of less than one year, you will need to declare any interest payment you receive in your tax return for that year. However, if you have invested your money for a period of longer than 12 months, when you declare your interest income depends on when the interest is paid on your account.

If interest is paid at maturity, you will need to declare that interest on your tax return for the year in which your investment matures. However, if interest is credited to you throughout the term, for example if you receive monthly or half-yearly interest payments, you will need to declare any interest earned for the financial year in which it was credited to your account.

What if I decide to roll over my interest earnings into a new term deposit?

When a term deposit matures, many people choose to automatically roll over their initial deposit and any interest earned into a new term deposit account. However, if you choose this option and re-invest your interest rather than accessing it, you will still need to declare the interest on your tax return.

If it's a joint term deposit the interest payments are split equally.

If your term deposit is a joint account, for example if you share ownership with your partner, the ATO assumes that each person has equal ownership of the funds in the account. The interest paid each financial year is therefore equally split between each account holder – 50% each if there are two account holders and 25% each if there are four account holders.

However, if the beneficial ownership of the account is not split into equal shares, you’ll need to provide documentation to the ATO to prove the amount of your share.

Providing your Tax File Number (TFN) to your bank will help at tax time.

When you’re filling out the paperwork to apply for a term deposit, one of the questions you’ll be asked is whether you would like to provide your TFN. While it’s not compulsory for you to supply your TFN to your bank, doing so is worth your while and will help you out at tax time.

If you don’t give your TFN to your bank, the bank is required to deduct withholding tax from the interest you earn and send it straight to the ATO. The bank will make the deduction at the highest marginal tax rate of 45%, plus the Medicare Levy of 1.5%, which may be a lot higher than your correct tax rate.

Withholding tax applies to accounts that earn $120 of interest or more per year. This figure rises to $420 for children’s accounts, so keep this in mind when deciding whether or not to provide your TFN to your bank.

Tax tips for term deposits

Want to minimise the tax you have to pay on term deposit interest? Keep the following tips in mind:

  • Plan your interest payments. Consider your likely tax liability for the financial year ahead. If you’re planning on having a term deposit mature in that year, will the interest payments you receive move you into a higher tax bracket? By structuring your term deposit interest payments carefully, you can reduce the risk of being stuck with a hefty tax bill in any given year.
  • Structure your term deposits. If you earn more income than your partner and you’re likely to face a sizable tax bill, you might want to consider structuring new term deposits so that they’re held in your partner’s name or perhaps owned jointly.

With careful planning and an eye to the future, you can make sure you always meet your obligations to the ATO, and hopefully ensure that you’re never stuck with a tax bill you can’t afford.

Find a tax agent

Use the help of an expert to manage your taxes and make the most of your tax return this year. Compare tax agents in Australia below.

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options Online tax returns On-site tax returns
finder Exclusive: $99 flat fee
Included in flat fee
Credit/Debit card
Bank Transfer
Pay with your tax refund (no upfront payment)
Australia wide
Melbourne
finder Exclusive: This discounted fee is only available to customers who apply for a tax return with A One Accountants through finder. Students, seniors and non-permanent residents enjoy a further discount with a $77 flat fee. Click 'Go to site' and complete the contact form to find out more. T&Cs apply. Option to pay with your tax refund for an extra fee of $22. Lodge returns online, via phone or in person.
$69*
$0 for up to $1000 of deductions
$41 for more than $1000 of deductions
Credit/Debit card
Cash
Australia wide
Sydney
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
$79*
$0 when you purchase the $49 income package
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
N/A
Option to pay with your tax refund for an extra fee of $10 for basic returns. Lodge individual & company tax returns. Fast online form & free live chat.
$80*
$0 for up to $1000 of deductions
$30 for more than $1000 of deductions
Credit/Debit card
Cash
Australia wide
Sydney
Fast and reliable tax returns for individuals, businesses and self-managed super funds (SMSFs).
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Credit/Debit card
Australia wide
Perth
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
$85*
Business tax: starting from $140
$0 for up to 4 deductions
Additional $30 for 5 or more deductions
Debit/Credit card
Bank transfer
Pay with your tax refund (no upfront payment)
Australia wide
Sydney
Option to pay with your tax refund for an extra fee of $50. Receive your tax return within 10 working days. Post-lodgement assistance in debt negotiation also available.
$99*
$0
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
Melbourne
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat.
$99*
$0 for up to 2 deductions
$29 for additional deductions
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
Sydney
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
$99*
Business tax: starting from $179
$29 for up to 2 deductions
Additional $29 for extra deductions
Credit/Debit card
Bank transfer
Pay with your tax refund (no upfront payment)
N/A
Melbourne
Option to pay with your tax refund for an extra fee of $29. Basic tax returns over the phone Australia-wide. In-person individual and business tax returns in Melbourne.
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Bank transfer
Credit/Debit card
Australia wide
Canberra
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.

Compare up to 4 providers

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options Online tax returns
finder Exclusive: $99 flat fee
Included in flat fee
Credit/Debit card
Bank Transfer
Pay with your tax refund (no upfront payment)
Australia wide
finder Exclusive: This discounted fee is only available to customers who apply for a tax return with A One Accountants through finder. Students, seniors and non-permanent residents enjoy a further discount with a $77 flat fee. Click 'Go to site' and complete the contact form to find out more. T&Cs apply. Option to pay with your tax refund for an extra fee of $22. Lodge returns online, via phone or in person.
$99*
$0
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat.
$79*
$0 when you purchase the $49 income package
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
Option to pay with your tax refund for an extra fee of $10 for basic returns. Lodge individual & company tax returns. Fast online form & free live chat.
$69*
$0 for up to $1000 of deductions
$41 for more than $1000 of deductions
Credit/Debit card
Cash
Australia wide
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
$99*
$0 for up to 2 deductions
$29 for additional deductions
Credit/Debit card
Pay with your tax refund (no upfront payment)
Australia wide
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Credit/Debit card
Australia wide
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Bank transfer
Credit/Debit card
Australia wide
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.
$85*
Business tax: starting from $140
$0 for up to 4 deductions
Additional $30 for 5 or more deductions
Debit/Credit card
Bank transfer
Pay with your tax refund (no upfront payment)
Australia wide
Option to pay with your tax refund for an extra fee of $50. Receive your tax return within 10 working days. Post-lodgement assistance in debt negotiation also available.
$80*
$0 for up to $1000 of deductions
$30 for more than $1000 of deductions
Credit/Debit card
Cash
Australia wide
Fast and reliable tax returns for individuals, businesses and self-managed super funds (SMSFs).

Compare up to 4 providers

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options On-site tax returns
$69*
$0 for up to $1000 of deductions
$41 for more than $1000 of deductions
Credit/Debit card
Cash
Sydney
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
$99*
$0 for up to 2 deductions
$29 for additional deductions
Credit/Debit card
Pay with your tax refund (no upfront payment)
Sydney
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
$85*
Business tax: starting from $140
$0 for up to 4 deductions
Additional $30 for 5 or more deductions
Debit/Credit card
Bank transfer
Pay with your tax refund (no upfront payment)
Sydney
Option to pay with your tax refund for an extra fee of $50. Receive your tax return within 10 working days. Post-lodgement assistance in debt negotiation also available.
$80*
$0 for up to $1000 of deductions
$30 for more than $1000 of deductions
Credit/Debit card
Cash
Sydney
Fast and reliable tax returns for individuals, businesses and self-managed super funds (SMSFs).

Compare up to 4 providers

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options On-site tax returns
finder Exclusive: $99 flat fee
Included in flat fee
Credit/Debit card
Bank Transfer
Pay with your tax refund (no upfront payment)
Melbourne
finder Exclusive: This discounted fee is only available to customers who apply for a tax return with A One Accountants through finder. Students, seniors and non-permanent residents enjoy a further discount with a $77 flat fee. Click 'Go to site' and complete the contact form to find out more. T&Cs apply. Option to pay with your tax refund for an extra fee of $22. Lodge returns online, via phone or in person.
$99*
Business tax: starting from $179
$29 for up to 2 deductions
Additional $29 for extra deductions
Credit/Debit card
Bank transfer
Pay with your tax refund (no upfront payment)
Melbourne
Option to pay with your tax refund for an extra fee of $29. Basic tax returns over the phone Australia-wide. In-person individual and business tax returns in Melbourne.
$99*
$0
Credit/Debit card
Pay with your tax refund (no upfront payment)
Melbourne
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat.

Compare up to 4 providers

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options On-site tax returns
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Credit/Debit card
Perth
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.

Compare up to 4 providers

Updated August 16th, 2018
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Payment Options On-site tax returns
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Bank transfer
Credit/Debit card
Canberra
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.

Compare up to 4 providers

*This is the minimum fee charged for income item tax returns. The price listed on this table is subject to terms and conditions. To find out more or to receive an accurate quote for your tax return, please visit the agent's website to submit an enquiry.

The products compared on this page are chosen from a range of products finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms "Best" and "Top" are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.

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