How is term deposit interest calculated?

For at-maturity deposits: interest = principal × rate × (term in years). For example, $25,000 at 4.75% for 12 months = $1,187.50. For deposits with periodic payments, interest compounds at each payment date — so the effective annual rate is slightly higher than the stated rate.

Is term deposit interest taxable in Australia?

Yes — interest earned on a term deposit is taxable income and must be declared on your tax return. Your bank will report the interest to the ATO. The tax year in which you pay tax depends on when the interest is received: at maturity for at-maturity deposits, or in each year for periodic payments.

What is the government guarantee on term deposits?

The Australian Government guarantees deposits up to $250,000 per person per Authorised Deposit-taking Institution (ADI). If you have more than $250,000 to deposit, consider splitting it across multiple banks to stay within the guarantee limit.

Should I choose a shorter or longer term deposit?

Longer terms usually (but not always) offer higher rates. However, you cannot access your money during the term without penalties. A popular strategy is laddering: spread your savings across several terms (e.g. 3, 6 and 12 months) so part of your money matures regularly and you can respond to rate changes.

How does compounding affect term deposit returns?

When interest is paid monthly or quarterly, each payment is reinvested and starts earning its own interest — this is compounding. For a 12-month deposit, monthly compounding at 4.75% gives an effective annual rate of about 4.85% vs 4.75% at maturity. Use the 'Interest paid' dropdown in this calculator to see the difference.

Term Deposit Calculator Australia

Calculate interest earned, after-tax return and effective annual rate for any Australian term deposit. Compare across terms and see the impact of your marginal tax rate.

Deposit Details

Principal

Annual interest rate

Term

1yr

months

Interest paid

Your Tax Rate

Marginal tax rate (incl. 2% Medicare levy)

Term deposit interest is taxable income in the year it is received

Term Comparison

Term	Gross	After tax
1mo	$99	$65
3mo	$297	$194
6mo	$594	$389
1yr	$1,188	$778
18mo	$1,781	$1,167
2yr	$2,375	$1,556
3yr	$3,563	$2,333
5yr	$5,938	$3,889

1yr at 4.75% p.a.

Interest earned

$1,188

After-tax interest

$778

Final balance

$25,778

Effective rate

4.750%

Breakdown

Principal$25,000

Gross interest$1,188

Tax at 34.5%-$410

After-tax interest$778

Final balance (after tax)$25,778

Rate Sensitivity (±0.5%)

5.25% rate

+$82

$860 after tax

4.75% current rate

$778 after tax

4.25% rate

-$82

$696 after tax

How to Use This Calculator

1Enter your deposit amount (principal)
2Enter the annual interest rate offered by your bank
3Select the term using the quick buttons or type in months
4Choose how often interest is paid (monthly, quarterly or at maturity)
5Select your marginal tax rate — interest is taxable income
6Compare terms in the table and rate sensitivity at ±0.5%

What Is a Term Deposit?

A term deposit is a savings account where you lock in a fixed amount of money for a set period at a guaranteed interest rate. Unlike everyday savings accounts, the interest rate is fixed for the entire term — so you know exactly what you will earn.

Australian banks and credit unions offer term deposits from 1 month to 5 years. Rates are typically higher for longer terms and larger balances. Interest can be paid monthly, quarterly, semi-annually, annually or at the end of the term (at maturity).

Interest earned on a term deposit is taxable income. If you choose to receive interest before maturity (e.g. monthly), it is taxed in the year it is received. At-maturity interest is taxed in the year the term ends.

Key Things to Know

Compounding frequency: When interest is paid periodically (monthly, quarterly etc.), each payment can earn its own interest — this is compounding. The effective annual rate (EAR) is always slightly higher than the stated rate when compounding occurs more than once per year.
At-maturity payment: Most short-term deposits (under 12 months) pay interest at maturity. This means you receive the full lump sum at the end of the term. No compounding occurs during the term, but the rate is often slightly higher than periodic-payment accounts.
Tax on interest: Interest is taxable income in Australia. Banks report interest paid to the ATO. Your after-tax return depends on your marginal tax rate — a 34.5% taxpayer keeps 65.5 cents of every dollar earned.
Early withdrawal penalties: Most term deposits incur a penalty for early withdrawal — typically a reduction in the interest rate or forfeiture of some interest. Make sure you don't need the funds during the term before locking in.
Government guarantee: Australian bank term deposits are protected by the Government Guarantee up to $250,000 per account holder per Authorised Deposit-taking Institution (ADI). This covers all Australian banks, credit unions and building societies.

Tips for Getting the Best Return

•Compare rates across multiple banks — online banks and credit unions often offer higher rates than the Big 4
•Ladder your deposits across multiple terms (e.g. 3mo, 6mo, 12mo) so part of your money matures regularly
•At-maturity is typically best for short terms; consider monthly payments for long terms to compound
•Check if the rate includes a 'special rate' bonus that requires you to reinvest at maturity at the same bank
•Interest paid quarterly or monthly improves cash flow but may offer slightly lower rates
•If your term deposit straddles two financial years, the tax may be split across two tax returns

Frequently Asked Questions