How does the ATO know about my interest?

Banks and financial institutions report the interest they pay you, linked to your tax file number, directly to the ATO. It then pre-fills into your tax return, usually from late July. You should still check it against your own statements, because pre-fill can be incomplete early in the season.

How much tax will I pay on my interest?

It depends on your marginal rate. If your other income already puts you in the 30% bracket, then $1,000 of interest adds about $300 of tax (plus Medicare levy). If you are below the $18,200 tax-free threshold overall, you may pay no tax on it at all.

What is TFN withholding tax on interest?

If you do not give your bank your tax file number, it must withhold tax from your interest at the top rate of 47% (45% plus the 2% Medicare levy). You can claim this back when you lodge, but it is far simpler to just provide your TFN so the bank pays you the full interest.

How is interest taxed on a joint account?

Interest on a joint account is generally split between the account holders according to their share — usually 50/50 for two people — and each person declares their portion. The ATO pre-fills each holder's share. If the real ownership split is different, you can adjust it, but you should be able to justify it.

Do children pay tax on their savings account interest?

It depends who really owns and controls the money. If the funds are genuinely the child's and they control them, the child's own (low) tax position applies. But if a parent controls the account and uses the funds, the interest is usually taxed in the parent's hands. Special higher rates can also apply to large amounts of unearned income for minors.

Do I pay tax on interest from foreign bank accounts?

If you are an Australian tax resident, you are generally taxed on your worldwide income, including interest from overseas accounts. You declare it in Australian dollars and may be able to claim a foreign income tax offset for tax already paid overseas. Overseas interest does not always pre-fill, so keep your own records.

Do You Pay Tax on Bank Interest? Australia 2025-26

Q: Do you pay tax on bank interest in Australia?

Yes. Interest from savings accounts, term deposits and similar is assessable income. It is added to your other income and taxed at your marginal rate. There is no separate, lower rate for interest and no tax-free amount of interest for adults.

Q: Is interest from an offset account taxable?

No, because an offset account does not pay you interest — it reduces the interest you are charged on your home loan. Since you are saving interest rather than earning it, there is nothing to declare. This is one reason offset accounts can be more tax-effective than a separate savings account.

With savings rates higher than they have been in years, a lot more Australians are earning real interest — and wondering whether they owe tax on it. The short answer is yes. Here is how tax on bank interest works for 2025-26, and the simple traps to avoid.

Quick answer

Yes — bank interest is taxable. It is added to your other income and taxed at your marginal rate, with no separate lower rate. Your bank reports it to the ATO and it pre-fills from late July. Give your bank your TFN, or it must withhold tax at 47% on your interest.

Is bank interest taxable in Australia?

Yes. Interest you earn from savings accounts, term deposits, high-interest accounts, bonds and similar is assessable income. It is added to your salary, side income and everything else, and the total is taxed at your marginal rate. There is no special concessional rate for interest, and for adults there is no tax-free slice of interest — it is simply part of your income.

How much tax will you pay on interest?

Because interest stacks on top of your other income, the tax on it depends on the bracket your income falls into. For the 2025-26 year, an extra $1,000 of interest costs:

Your marginal rate	Tax on $1,000 of interest*
0% (under $18,200 total)	$0
16%	~$180 (incl. 2% Medicare levy)
30%	~$320 (incl. 2% Medicare levy)
37%	~$390 (incl. 2% Medicare levy)
45%	~$470 (incl. 2% Medicare levy)

*Approximate, including the 2% Medicare levy where it applies. Your own result depends on your full circumstances.

How the ATO finds out: pre-fill

You do not have to chase down every cent yourself. Banks and other institutions report the interest they paid you — matched to your tax file number — straight to the ATO. That information pre-fills into your tax return, usually from late July once the data lands.

Still check it. Early in the lodgment season the pre-fill can be incomplete, and accounts you opened mid-year or with smaller lenders may report later. Compare the pre-filled figure against your own statements before you submit.

The TFN trap: 47% withholding

If you do not give your bank your tax file number, the bank is required to withhold tax from your interest at the top rate of 47% (45% plus the 2% Medicare levy). You can claim that back when you lodge, but it is an interest-free loan to the government in the meantime. The fix is simple: make sure every account has your TFN recorded.

Joint accounts and shared interest

Interest on a joint account is split between the holders according to their share of the money — usually 50/50 for a couple — and each person declares their portion. The ATO pre-fills each holder's share automatically. If the true ownership is not equal, you can adjust the split, but be ready to justify it.

Children's accounts

For a child's savings account, the key question is who really owns and controls the money. If it is genuinely the child's and they control it, the child's own tax position applies. If a parent controls the account and uses the funds, the interest is usually taxed in the parent's hands. Large amounts of unearned income for minors can also attract special higher rates designed to stop income-splitting.

A tax-smart angle: offset accounts

An offset account linked to your home loan does not pay you interest — it reduces the interest you are charged. Because you are saving interest rather than earning it, there is nothing to declare. For a homeowner, parking savings in an offset can be more tax-effective than a separate savings account, where every dollar of interest is taxable.

Frequently asked questions

See how your interest changes your refund

Add your bank interest to your income in EOFYmate's free estimator and watch the effect on your tax and refund at your marginal rate — no account needed.

Estimate the tax on my interest

Related guides

This guide is general information only and not personal tax advice. Always confirm with the ATO at ato.gov.au or a registered tax agent before lodging.

All tax guides