The interest you earn from term deposits is subject to tax, just like your regular income. You have to declare investment income on your tax return, including interest in the year it was credited or received.

The amount of tax you need to pay depends on the amount of interest you earn on your term deposit as it is part of your overall taxable income and will therefore be taxed at the same marginal tax rate that applies to the rest of your income. The ATO’s marginal tax rates for the current financial year are:

• $0 for an income of $18,200
• 19c for each $1 over $18,200 for an income of $18,201 – $37,000
• $3,572 plus 32.5c for each $1 over $37,000 for an income of $37,001 – $90,000
• $20,797 plus 37c for each $1 over $90,000 for an income of $90,001 – $180,000
• $54,097 plus 45c for each $1 over $180,000 for an income of $180,001 and over

If you decide to roll over your interest earnings into a new term deposit, you will still need to declare the interest on your tax return if you choose to reinvest the money instead of accessing it.

Term deposits run under a joint account will have the ATO assuming each person has equal ownership to the funds in the account. This means that the interest earned is equally split between you and your account partner(s), where you will have to pay tax on your portion. If the funds in your account are not split equally, you can provide the ATO with documentation proving the amount you each earn and be taxed different amounts accordingly.