Your tax liability for the interest earned through a savings account can depend on whether you alone are operating the account for yourself. For instance, if you and your spouse have a joint savings account and you both put in and take out money from it, the interest earned would be equally split between the two of you. Each of you would then need to declare half the interest amount along with other taxable income. You’d then have to pay tax on the total income per the ATO’s tax rates.
Below is a summary of the current tax rates for Australian residents (without the 2% Medicare levy):
- If you earn up to $18,200, you are not liable to pay any tax.
- If you earn between $18,201 – $45,000, you have to pay a tax of 16 cents per every dollar you earn over $18,200.
- If you earn between $45,001 – $135,000, you have to pay a flat tax of $4,288 in addition to 30 cents per every dollar you earn over $45,000.
- If you earn between $135,001 – $190,000, you have to pay a flat tax of $31,288 in addition to 37 cents per every dollar you earn over $135,000.
- If you earn more than $190,001, you have to pay a flat tax of $51,638 in addition to 45 cents per every dollar you earn over $190,000.
Source: The ATO website
These tax rates can also be revised from time to time - you should check the ATO website for the latest rates or talk to a tax accountant.
If you’re operating the savings account on behalf of a child, the tax rate can vary further. In this case, the account may be taxed at a higher rate if the child’s date of birth or tax file number (TFN) is not on file and the account is used to receive cash gifts but not for other transactions. Suppose an adult operates the account on behalf of a child, depositing money they’ve earned and withdrawing money for the child’s expenses. In that case, the interest earned is considered the adult’s income and taxed with the rest of their earnings.
