How is term deposit interest calculated?

Term deposit interest depends on the compounding frequency. At-maturity deposits use simple interest: principal x rate x term. Monthly, quarterly, or annually compounding deposits use compound interest where interest earns interest. For example, $10,000 at 5% for 12 months with monthly compounding earns about $512 — slightly more than the $500 from simple interest.

Is term deposit interest taxable in Australia?

Yes, term deposit interest is taxable income in Australia. It must be declared in your tax return for the financial year the interest is received or credited to your account. The interest is taxed at your marginal tax rate. For at-maturity deposits spanning two financial years, the interest is typically taxable when it is paid at maturity.

What happens if I withdraw a term deposit early?

Most banks allow early withdrawal but impose a penalty, usually a reduction in the interest rate. The penalty varies by bank but commonly reduces the rate by 1-2 percentage points or applies the at-call savings rate instead. Some banks may also charge an administration fee. Always check the terms before locking in a term deposit.

Term Deposit Calculator

Enter your deposit amount, interest rate, term, and compounding frequency to see how much interest you'll earn. Compare against a savings account to see if locking your money away is worth it.

Last verified: 5 May 2026

How much interest will I earn on a term deposit?

Competitive Australian term deposit rates in 2026 run 4.5-5.2% p.a. for 6-12 month terms. At-maturity deposits use simple interest (principal × rate × term). Longer deposits with monthly or quarterly compounding earn slightly more because interest earns interest. Interest is fully taxable as ordinary income at your marginal tax rate and is declared in the financial year it is credited. Break costs typically reduce the rate by 1-2 percentage points. Source: ASIC MoneySmart; APRA Monthly Banking Statistics.

Worked examples. $10,000 at 5% for 12 months at-maturity → $500 interest. Same deposit compounding monthly → ~$512. $50,000 at 5% for 12 months at-maturity → $2,500 interest (after 30% MTR ≈ $1,750 net). $100,000 at 4.8% for 3 years compounding annually → ~$15,100 total interest (maturity ~$115,100). Compare to a high-interest savings account at 5% for equivalent liquidity — term deposits rarely win once the break-cost risk is priced in.

General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.

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