How is savings account interest taxed in Australia?

Interest earned on savings accounts, term deposits, and offset accounts is assessable income in Australia. It is added to your taxable income for the year and taxed at your marginal rate. The bank will report interest payments to the ATO, and it will typically be pre-filled in your myTax return.

If you provide your Tax File Number (TFN) to the bank, interest is paid to you in full and you declare it in your return. If you do not provide your TFN, the bank must withhold tax at the top marginal rate (47% including Medicare levy), and you claim a credit for that withholding when you lodge.

For interest earned in a joint account, the ATO requires each account holder to declare their share of the interest based on ownership interest. Typically this is 50/50 for joint accounts, but if the funds clearly belong to one person, that person should declare the full amount. If you earn interest above the interest earned threshold and it is your only income outside a salary, the ATO's pre-filled data means it should already be in your return without any action needed.