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How and when do you pay tax on term deposit interest?

By Peter Terlato ·
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Earning interest on your savings can be rewarding, but it also comes with tax responsibilities. If you’re thinking about a term deposit, it’s worth understanding how tax affects the interest you’ll earn. Here’s what you need to know about paying tax on term deposit interest.

A term deposit is one of the simplest and safest ways to grow your savings. You lock your money away for a set period, letting the interest build over time. With fixed interest rates, term deposits provide predictable returns, even if the Reserve Bank of Australia (RBA) changes the cash rate during your investment term.

Is interest from a term deposit taxed?

Yes. Just as with savings accounts, the interest earned on a term deposit is treated as income by the Australian Taxation Office (ATO). The amount is combined with other assessable sources of income - such as employment income, superannuation payments, and earnings from investments - and are taxed accordingly.

When do I need to declare interest?

The timing of your interest declaration depends on how frequently you receive interest payments:

  1. If interest is paid out at maturity, you'll declare it in the financial year when your term deposit matures. This applies even if your investment spans multiple years.
  2. If interest is credited to your account periodically (e.g. monthly), you must declare it in the financial year you receive each payment. This may result in declaring interest across multiple financial years for a single term deposit.

What if my term deposit is jointly held?

For term deposits with multiple account holders, the ATO assumes equal ownership unless proven otherwise. Each account holder is responsible for declaring their portion of the interest earned.

For example, if you and your spouse jointly hold a term deposit that earns $500 in interest in a financial year, you would each declare $250 on your respective tax returns. If the ownership split isn't equal, you'll need to provide documentation to support a different allocation.

What if I roll over my term deposit, including the interest earned?

Many banks offer automatic reinvestment when your term deposit matures. If you choose to roll over your term deposit, including the earned interest, you still need to declare that interest at the rollover date. The reinvested interest becomes part of your new principal amount.

Do I need to provide my Tax File Number when I open a term deposit?

When opening a term deposit, your bank will request your Tax File Number (TFN). While not mandatory, providing your TFN is highly recommended. If you don't supply a valid TFN (or TFN Exemption), your bank must withhold tax from your interest earnings at the highest marginal tax rate. You can claim this withheld amount when you lodge your tax return, but it's more convenient to provide your TFN upfront.

What happens if I declare interest incorrectly?

Financial institutions report interest payments to the ATO, which cross-references this information with individual tax returns. Discrepancies are likely to be detected quickly and may result in adjustments to your tax assessment or penalties.

If you inadvertently omit interest from your tax return, the ATO may notify you of the mistake. They'll provide a deadline for submitting the correct information and issue an amended assessment. It's crucial to respond promptly to avoid further complications.

Finding the right term deposit

If you're ready to explore term deposit options, consider reviewing our term deposit interest rates comparison page. For a curated selection of top performers, you might also check out the Mozo Experts Choice Award Term Deposit winners. These resources can help you find a term deposit that aligns with your financial goals while ensuring you're prepared for the associated tax responsibilities.

Do pensioners pay tax on term deposits?

If the type of pension you earn counts as income, then the amount of interest you earn could potentially push you past the tax-free threshold.

Mozo may receive payment if you click products on our site. We don’t compare the entire market, but you can search our database of 91 term deposits using the filters.
Last updated 5 December 2025 Important disclosures

Term deposit comparisons on Mozo

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  • Promoted

    Term Deposit

    Best rate
    4.45 % p.a.
    for 1 year
    ($1,000 to $2,000,000)
    Next best option
    4.40 % p.a.
    for 5 years
    ($1,000 to $2,000,000)
    Go to site
    • 0.05% added loyalty bonus at renewal
    • Option to have interest paid to another bank
    • Winner of the Mozo Experts Choice Awards 2025^ for Term Deposits.
  • Promoted

    Special Term Deposit

    Best rate
    4.40 % p.a.
    for 8 months
    ($10,000 to $1,000,000)
    Next best option
    4.20 % p.a.
    for 1 year
    ($10,000 to $1,000,000)
    Go to site
    • Offer available until 31 Dec 2025 or until limited allocation is reached
    • Minimum deposit of $10,000
    • Interest paid on maturity

  • Term Deposit

    Best rate
    4.45 % p.a.
    for 1 year
    ($1,000 to $2,000,000)
    Next best option
    4.40 % p.a.
    for 5 years
    ($1,000 to $2,000,000)
    Go to site
    • 0.05% added loyalty bonus at renewal
    • Option to have interest paid to another bank
    • Winner of the Mozo Experts Choice Awards 2025^ for Term Deposits.

  • Special Term Deposit

    Best rate
    4.40 % p.a.
    for 8 months
    ($10,000 to $1,000,000)
    Next best option
    4.20 % p.a.
    for 1 year
    ($10,000 to $1,000,000)
    Go to site
    • Offer available until 31 Dec 2025 or until limited allocation is reached
    • Minimum deposit of $10,000
    • Interest paid on maturity

  • Standard Term Deposit

    Best rate
    4.35 % p.a.
    for 6 months
    ($1,000 to $1,000,000)
    Next best option
    4.30 % p.a.
    for 4 months
    ($1,000 to $1,000,000)
    Go to site
    • Choose from terms starting at 1 month, up to 3 years
    • Interest paid monthly, annually or at maturity (term dependent)
    • Option to have interest paid into another bank account

  • Term Deposit

    Best rate
    4.30 % p.a.
    for 4 months
    ($5,000 to $1,000,000)
    Next best option
    4.15 % p.a.
    for 11 months
    ($5,000 to $1,000,000)
    Go to site
    • Terms range from 2 months to 5 years
    • Interest paid at maturity or regularly (monthly, quarterly, or annually)
    • No monthly account fees

  • Term Deposit

    Best rate
    4.00 % p.a.
    for 5 years
    ($5,000 to $100,000)
    Next best option
    4.00 % p.a.
    for 4 years
    ($5,000 to $100,000)
    Go to site
    • Term deposits available for 3, 6 or 12 months
    • No monthly account fees
    • Minimum deposit of $5,000
Showing 5 results from 91 term deposits. Use the filters to see more

* Different interest rates apply to different amounts or different interest payment frequencies.

^See information about the Mozo Experts Choice Term Deposit Awards

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