tax-rate

How is tax applied on my savings account?

Amplify your savings opportunity by knowing the Australian tax regulations for your interest earnings.

Australians are encouraged to save what they can through a large number of interest earning accounts offered by banks and other financial institutions. Yet, what many don’t realise is that those interest payments count as taxable earnings, which could result in you receiving less than what you had planned on.

What is investment income?

Any income that is derived from dividends, capital gains from the sale of an asset, or interest payments made to you is considered to be investment income. This includes any profit you make through an investment vehicle of any kind, including a savings account. Interest earnings are considered to be the profit gained from your savings investments, making them a taxable earning.

For most Australians, the majority of your income is earned through your employment. Investment income is typically gained by using a portion of your regular income to earn more money. When you put your money into a savings product that is earning interest, you are making an investment, no matter how small that amount may be.

Rates last updated November 21st, 2018
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
ING Savings Maximiser
2.80%
1.00%
1.80%
$0
$0 / $0
Ongoing, variable 2.80% p.a. when you link to an ING Orange Everyday bank account and deposit $1,000+ each month and make 5+ card purchases a month. Available on balances up to $100,000.
HSBC Serious Saver
3.10%
1.40%
1.70%
$0
$0 / $0
Introductory rate of 3.10% p.a. for 4 months, reverting to a rate of 1.40% p.a. Available on balances below $1,000,000.
RaboDirect High Interest Savings Account
3.05%
1.80%
1.25%
$0
$0 / $0
Introductory rate of 3.05% p.a. for 4 months, reverting to a rate of 1.80% p.a. Available on balances below $250,000
Bankwest Hero Saver
2.60%
0.01%
2.59%
$0
$0 / $0
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
AMP Saver Account
2.55%
2.10%
0.45%
$0
$0 / $0
Introductory rate of 2.55% p.a. for 4 months, reverting to a rate of 2.10% p.a. Available on balances below $5,000,000.
HSBC Flexi Saver Account
2.50%
1.25%
1.25%
$0
$0 / $0
Ongoing, variable 2.50% p.a. when you deposit $300+ each month (other conditions apply). Available on balances up to $5,000,000.
AMP Bett3r Account
2.25%
1.50%
0.75%
$5
$0 / $0
With AMP's bundled Bett3r account, get three linked Pay, Spend and Save accounts. Earn a competitive, ongoing rate of up to 2.25% on your Save account balance when you deposit $2,000 into the Pay account each month from a source that is not another AMP Bank account.

Please note: The 2.25% maximum variable rate is earned only on your Save account balance. To calculate interest earned, enter your initial and monthly deposit amounts for the Save account only, not including any money that’ll be in your Spend or Pay account.
MyState Bank Bonus Saver Account
2.60%
0.80%
1.80%
$0
$0 / $0
Ongoing, variable 2.60% p.a. when you deposit at least $20 into the account each month and make five or more Visa Debit card transactions from a linked MyState transaction account.

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Rates last updated November 21st, 2018
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
AMP Saver Account
2.55%
2.10%
0.45%
$0
$0 / $0
Introductory rate of 2.55% p.a. for 4 months, reverting to a rate of 2.10% p.a. with no withdrawal or deposit conditions. Available on balances below $5,000,000. This account can be opened on behalf of kids under the age of 18 by a parent or guardian. T&Cs apply.
MyState Bank Bonus Saver Account
2.60%
0.80%
1.80%
$0
$0 / $0
Ongoing, variable 2.60% p.a. for kids aged 13 or over, when they deposit at least $20 into the account each month and make five or more Visa Debit card transactions from their linked MyState transaction account.
BCU Scoot's Super Saver
3.50%
0.75%
2.75%
$0
$0 / $0
Ongoing, variable 3.50% p.a. when you deposit $20+ each month and make no more than $5 in withdrawals within the same month.
Available on the entire balance.
People's Choice Young Saver Account
2.55%
1.45%
1.10%
$0
$0 / $0
Ongoing, variable 2.55% p.a. when you deposit $5+ each month and make no withdrawals within the calendar month. Available on the entire balance.
Suncorp Kids Savings Account
2.60%
1.40%
1.20%
$0
$0 / $0
Ongoing, variable 2.60% p.a. when you deposit $20+ and make only one withdrawal each month. Available on balances more than $0.01.

Compare up to 4 providers

Rates last updated November 21st, 2018
$
$
months
Name Product Maximum Variable Rate p.a. Standard Variable Rate p.a. Bonus Interest p.a. Fees Min Bal / Min Deposit Interest Earned Product Description
Bankwest Hero Saver
2.60%
0.01%
2.59%
$0
$0 / $0
Ongoing, variable 2.60% p.a. rate when you deposit at least $200 each month and make no withdrawals. Available on balances up to $250,000.
Commonwealth Bank GoalSaver Account
2.30%
0.01%
2.29%
$0
$0 / $0
Ongoing, variable interest rate up to 2.30% p.a. on balances $250,000 - $999,999 when you deposit at least $200 p/m with no withdrawals.

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Tax on children’s savings accounts

Children’s savings accounts are common ways for parents to invest in their child’s future. The interest that is earned on these accounts can also be taxable, depending on the circumstances. For example, if the account is commonly used by the parents or other signatory to pay expenses than the money is considered theirs, including the interest earnings. When the child is using the account only to guard their own funds, such as money earned for part-time work and gifts, then any interest earned is solely the child’s.

Tax is applied to the interest earned, even if the account is deemed the child’s, when that amount is more than $416. The tax rate on those earnings will depend on the amount of the earnings, but could be as high as 66%. Children who qualify for tax payments on their interest earnings will be required to lodge a tax return for that year, but if they are working or have certain disabilities they may be entitled to exemptions.

International tax for individuals

If you are an Australian resident or Australian resident for tax purposes, you are required to report and pay taxes on all income earned, including any money earned outside of the country. Temporary and foreign residents are only responsible for paying tax on the income they earn from working at an Australian based job. This makes it especially important for foreign residents to understand their residency status in order to be compliant with Australian tax law.

You are considered an Australian resident for tax purposes if you do not have a permanent home in another nation, are a foreign student enrolled in a class that is longer than six months, or you are visiting Australia for more than six months and have established ties in your local community. A foreign resident for tax purposes is one who is visiting the country for less than six months or visiting for more than six months but have not established a permanent home.

You may also be interested in

Why do I need to provide my TFN when opening a savings account?

For an Australian, your Tax File Number (TFN) is an imperative part of your tax and super records. It is a part of your identity, and will remain yours for life. This personal reference number is not mandatory to have, but without it you will pay more income tax.

When you apply for a savings account in Australia, it is also not mandatory to provide your TFN, but it could help to avoid having a withholding tax deducted from your interest earnings. Banks in Australia are obligated by law to withhold a certain amount from your interest earnings and send those funds to the tax office if you have not given them your TFN.

If you do provide your TFN, the bank will be able to report your earnings directly to the Australian Tax Office, (ATO), and will not need to deduct the tax from them. If you fill out your own tax forms online, you will find that the interest earnings field is already filled in, making the reporting of this income easier. Not only does providing your TFN allow the bank to pay you your full interest earnings, it helps with your reporting of income.

Shirley Liu

Shirley Liu is a program manager at finder, formerly the publisher for Banking and Investments. She is passionate about helping people make an informed decision, save money and find the best deal for their needs.

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Related Posts

Savings Account Offers

Important Information*
ING Savings Maximiser

Maximum Variable Rate

2.80

Standard Variable Rate

1.00
RaboDirect High Interest Savings Account

Maximum Variable Rate

3.05

Standard Variable Rate

1.80
AMP Saver Account

Maximum Variable Rate

2.55

Standard Variable Rate

2.10
Bankwest Hero Saver

Maximum Variable Rate

2.60

Standard Variable Rate

0.01

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