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Do you pay tax on savings account interest in Australia? Computer says yes
Just like any other source of funds or profit, interest is 'income', according to the government. So the extra cash you earn in your savings account is taxed at your income tax rate.
Yes, you need to include interest in your tax return.
When you file your income tax return at the end of the financial year, you need to declare all your sources of income, including interest you've earned in your savings account. You'll declare the interest only, not your whole balance, and pay tax on it at your standard income tax rate.
If your annual earnings fall below the income tax threshold for the year, you may not need to pay tax on your interest. But you still need to declare it.
At what rate is the interest taxed?
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 2024–25 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.
Example: Asad earns $95,000 and another $5,000 in interest
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 (not including Medicare Levy). When Asad does his tax return, he declares his interest earned along with a number of work-related tax deductions. The ATO processes both his claims and his declared interest, and calculates whether he is due to get a refund or whether he owes the ATO money.
Finder survey: How do Australians pay their taxes in different states?
Response
WA
VIC
SA
QLD
NSW
BPAY
44.66%
43.18%
32.88%
45.18%
42.24%
Bank transfer
27.18%
27.27%
24.66%
21.32%
22.36%
Debit card
13.59%
14.02%
19.18%
14.72%
17.7%
Credit card
11.65%
11.36%
16.44%
14.72%
13.98%
Other
2.91%
4.17%
6.85%
4.06%
3.73%
Source: Finder survey by Pure Profile of 1004 Australians, December 2023 Data for ACT, NT, TAS not shown due to insufficient sample size. Some other states may also be excluded for this reason.
Why do I need to declare interest?
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.
Hot tip: Give your Tax File Number (TFN) to your bank
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 1.5%. This is the case even if you should actually be in the bottom tax bracket. You are eligible to receive any overpaid tax back when you lodge you tax return
To avoid withholding tax, you can either supply your TFN when you apply for an account, or get in touch with your bank at any time to provide your TFN via internet banking, over the phone or at your nearest branch. This makes the process so much easier come tax time!
Expert insight: Check your interest on your 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."
The ATO assumes that joint account holders are equal owners of an account and requires them to pay tax accordingly. For example, if you have a joint savings account with your partner, the interest paid will be split equally between the two account holders at 50% each. At tax time, each person will then have 50% of the interest earned added to their taxable income.
What about interest earned on a children’s savings account?
If you've opened a savings account for your child but you spend the money in the account for your own day-to-day purchases, then you need to declare any interest earned in your own tax return. In some cases the funds in the account will be made up of the child’s own money – for example, they might deposit money given as a Christmas or birthday present, their pocket money, or income they earn from a part-time job such as a paper round. If the money in the account is only used by 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 $420 for the financial year, they will not have to file an income tax return. If the child is less than 16 years old and the interest earned is more than $420, they will need to lodge a tax return.
Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full bio
Alison's expertise
Alison has written 645 Finder guides across topics including:
Your tax return has a different deadline depending on which financial year you're filing for, and whether or not you're using a tax agent. See which tax return due date applies to you in this guide.
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
Finder
DeeMay 7, 2017Finder
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
TomMay 9, 2017
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.
Finder
DeeMay 11, 2017Finder
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
MoonNovember 21, 2016
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.
Finder
DeeNovember 21, 2016Finder
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
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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