Is Interest Income Taxable in Australia? (2026–27 Guide)

Interest Income and Its Tax Implications in Australia

Yes, interest is taxable in Australia. It is assessable income, declared in your tax return for the year it is paid or credited to you, and taxed at your marginal rate with your other income. That includes interest from savings accounts, term deposits, bonds, loans you've made and interest the ATO pays you. This guide covers how much tax you pay, joint and children's accounts, TFN withholding and how to report it.

What You'll Learn

• What is interest income?
• How is interest income taxed in Australia?
• Special cases: children, super, non-residents and foreign interest
• Reporting interest income on your tax return
• Ways to manage tax on interest
• Interest income FAQs

What is Interest Income?

Interest income is the money you earn from lending your money to others or keeping it in certain types of financial accounts. This includes interest earned on:

• Savings accounts, including bonus interest
• Term deposits
• Bonds and other fixed-interest securities
• Loans you've made to others
• Interest the ATO pays you, such as interest on early payments, overpayments and delayed refunds
• Other investment products that generate interest

Interest income is considered passive income, meaning it's money you earn without actively working for it. It's different from employment income, business income, or other types of active income that require your direct effort and participation.

How is Interest Income Taxed in Australia?

In Australia, interest income is generally considered taxable income and must be reported on your annual tax return. This means the interest you earn throughout the year will be added to your total assessable income, and you'll be required to pay income tax.

You declare interest in the income year it is paid or credited to your account, even if you leave it there. For a term deposit, that is usually when the interest is paid, often at maturity. A home loan offset account doesn't earn interest (it reduces the interest on your loan), so there is nothing to declare.

The tax rate applied to your interest will depend on your overall taxable income and the tax bracket you fall into. Australia has a progressive tax system, which means that as your income increases, you'll be taxed at a higher marginal tax rate.

Here are the resident tax rates for 2026–27 (1 July 2026 to 30 June 2027). They don't include the 2% Medicare levy.

• 0% on the first $18,200
• 15% on taxable income from $18,201 to $45,000
• 30% on taxable income from $45,001 to $135,000
• 37% on taxable income from $135,001 to $190,000
• 45% on taxable income over $190,000

For 2025–26 returns, the first rate was 16% (on $18,201 to $45,000); the other rates are the same. Try our tax calculator or read how marginal tax rates work.

Tax on $1,000 of interest in 2026–27, including the 2% Medicare levy, depending on your total taxable income:

• Taxable income up to $18,200: $0
• $18,201 to $45,000: $170
• $45,001 to $135,000: $320
• $135,001 to $190,000: $390
• Over $190,000: $470

Worked example: how much tax on interest?

Mia earns a $70,000 salary in 2026–27 and $1,500 interest from a savings account. Her taxable income is $71,500, which is in the 30% bracket. Tax on the interest is $1,500 × 30% = $450, plus $30 Medicare levy (2%), so $480 in total. Her bank has her TFN, so nothing is withheld; the tax is worked out when she lodges.

It's important to note that these tax rates are subject to change, so it's always a good idea to check the latest information from the Australian Taxation Office (ATO) or consult a tax professional.

Special cases: children, super, non-residents and foreign interest

Most interest is taxed the same way, but some situations work differently.

Children's savings accounts

Who declares interest on a child's account depends on whose money it is, not whose name is on the account. If you provide the money and decide how it's spent, the interest is yours to declare. If the money genuinely belongs to the child, such as birthday gifts, the interest is the child's. Special tax rates apply to resident minors' unearned income:

• Up to $416 a year: no tax.
• $417 to $1,307: 66% of the amount over $416.
• Over $1,307: 45% on the whole amount.
• Wages and other excepted income are taxed at normal adult rates.
• A child under 16 can earn under $420 a year in interest without quoting a TFN if they give the bank their date of birth. Otherwise the bank withholds 47%.

Low-Income Earners

If your taxable income is $18,200 or less, you won't pay income tax. If you lodge a return, include all your interest. If your bank withheld tax because it didn't have your TFN, lodging a return is how you get it back.

Superannuation Funds

Interest earned inside your super fund is taxed in the fund, generally at up to 15% in the accumulation phase. You don't declare it in your own tax return.

Non-residents

If you're a foreign resident for tax purposes and your bank has your overseas address, it withholds 10% non-resident withholding tax from your Australian interest. This is a final tax, so you don't include the interest in an Australian return. Without your overseas address, the bank withholds 47%. See our non-resident tax return guide.

Overseas interest

Australian residents are taxed on worldwide income. Interest from an overseas bank account must go in your return, even if the other country doesn't tax it. If you paid foreign tax on it, you may be able to claim a foreign income tax offset.

Reporting Interest Income on Your Tax Return

When it comes to reporting interest income on your tax return, there are a few key steps to follow:

1. Check your statements: your bank's annual summary shows the interest paid or credited for the financial year (1 July to 30 June).
2. Check pre-filled amounts: in myTax, interest reported by banks is usually pre-filled. Check it and add any missing accounts.
3. Declare your share of joint accounts: interest is split equally between account holders unless you can show the money is owned differently. Keep a record of how you worked it out.
4. Include TFN amounts withheld: if tax was withheld because you didn't give your TFN or ABN, include it in your gross interest and claim it as a credit.
5. Include ATO interest: interest the ATO paid you on early payments, overpayments or delayed refunds goes in at the same question.
6. Pay any tax owing: banks don't withhold tax when they have your TFN, so tax on interest is worked out when you lodge. If you have significant investment income, the ATO may put you on PAYG instalments.

No TFN? Expect 47% withholding. If your bank doesn't have your TFN (or ABN), it must withhold tax at 47% (the top rate plus Medicare levy) once interest reaches $120 a year. You get it back as a credit when you lodge. Find a lost TFN.

You can claim expenses you incur in earning interest, such as account-keeping fees on accounts held for investment, investment advice fees, and interest on money you borrowed to buy interest-earning investments. If a loan or account is partly private, claim only the investment part. Fees on everyday accounts you use for personal spending generally aren't deductible.

Ways to manage tax on interest

Bank and bond interest doesn't get a special tax rate, but a few things affect how much tax you pay on it:

1. Offset accounts: if you have a home loan, money in an offset account reduces your loan interest instead of earning taxable interest.
2. Super: earnings inside super are generally taxed at up to 15%, but contribution caps and access rules apply.
3. Ownership records: for joint and children's accounts, keep records showing whose money it is.
4. Advice: a registered tax agent can review your tax position. For advice on investment products, see a licensed financial adviser.

Conclusion

Interest is taxable income in Australia. Declare all interest paid or credited to you in the financial year, check pre-filled figures, split joint accounts by ownership, and give your bank your TFN to avoid 47% withholding. If you have children's accounts, overseas interest or investment loans, our tax return service can help, or contact us.