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 (or if you’re a non-resident of Australia), 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.
Luckily you are 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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Am I taxed the same on savings regardless of the type of account?
Hi Kylie!
Taxes can be a bit of a headache, can’t they? Interest earned from financial institution accounts and term deposits is considered as an investment income. Others falling in this category are:
Check with the Australian Taxation Office (ATO) to see how these accounts are taxed or talk to a tax accountant for this matter. :)
Hope this helps.
Cheers,
Jonathan
I have question regarding transfers from family member accounts.
If I transfer money to account belonging to a family member, will it have an impact on the income tax? even if sometimes I ask this family member to make payments from his account for my expenses? (more related to daily activity, bills,tickets, ..)
I’mt talking about transfer to parents/childrens/siblings which are not employed in Australia during the last year
Hi Tom,
Thanks for your question.
If you are transferring to a child, the tax impact will depend on who has the control of the funds. As a rule, if a parent provides the funds for the child’s account and spends or uses the funds in the account as they wish, the parent must declare interest earned from the account on their own tax return. However, in case where the funds in the account will be made up of the child’s own money and if the funds in the account are not used by any person other than the child, the interest earned is classified as the child’s income. If the child’s only source of income is interest totalling less than $416 for the financial year, they will not have to file an income tax return.
This is just a general rule which may not apply to your specific situation. You may have to get in touch with a tax specialist to confirm.
Cheers,
Anndy
Thank you Anndy
perhaps my question wasn’t clear.
if my family member wants to transfer for example 30.000, to my account – and I will be using this money for example to pay bills online, charity on this family member behalf, will the bank ask me to report my the 30.000 as my income, which requires some tax?
We want make it simple it’s a matter of making daily activity easy, not transferring millions from account to another account.
Hi Tom,
Thanks for your question and I’m sorry for the confusion.
Kindly note that in regards to savings account, you will only pay tax on the interest earned. As for the impact of the $30,000 to your overall tax, that is something I am not sure of. It would be best if you seek advice from an accountant or financial adviser who is more knowledgeable about tax matters.
Cheers,
Anndy
Do I have to pay tax on my saving account?. I’m 68 years old, and retired 10 months ago. I did not provide my TFN with the bank.
Hi Moon,
Thanks for your question.
Generally, interest earned on a savings account is subject to taxes. You don’t have to provide your TFN, but if you don’t the bank is legally required to deduct tax from any interest earned on the account above a certain threshold.
Cheers,
Anndy