Taxes on Your Savings and Investments
Not all investment income is taxed the same way in Australia — understanding the differences helps you decide where and how to hold your savings and investments.
Interest and Dividends: Taxed at Your Marginal Rate
Interest earned on savings accounts and term deposits outside super is added to your assessable income and taxed at your marginal income tax rate — there's no separate tax-free allowance for interest in Australia, unlike some other countries. Dividends from Australian shares work differently if they're 'franked': the franking credit attached represents tax the company already paid, which offsets your own tax on that dividend and can even be refunded if your tax bill is lower than the credit.
Capital Gains Tax and the 50% Discount
Capital Gains Tax (CGT) applies when you sell an investment for more than you paid, with the gain added to your assessable income in the year of sale. If you've held the asset for more than 12 months, you generally qualify for a 50% CGT discount, meaning only half the gain is taxed at your marginal rate — a strong incentive to hold investments longer than a year where it makes sense to do so.
Superannuation's Different Tax Treatment
Investment earnings inside super are taxed at a maximum of 15% (and can become tax-free once you're drawing an account-based pension in retirement), a meaningfully lower rate than most people's marginal tax rate outside super. This is the core reason voluntary super contributions are tax-efficient — see the article on super vs. investing outside super for how the two fit together.
Frequently Asked Questions
- How is savings interest taxed in Australia?
- It's added to your assessable income and taxed at your marginal income tax rate — there's no separate tax-free allowance for interest, unlike some other countries.
- What are franking credits?
- A tax credit attached to many Australian share dividends, representing tax the company already paid on that profit — it offsets your own tax on the dividend, and can be refunded if your tax bill is lower than the credit.
- What is the Capital Gains Tax discount?
- If you've held an investment for more than 12 months before selling, you generally only pay tax on 50% of the capital gain, taxed at your marginal rate — a strong incentive to hold investments for longer than a year.
- Is superannuation taxed differently from investments outside super?
- Yes — investment earnings inside super are generally taxed at a maximum of 15% (and can be tax-free in retirement), lower than most people's marginal tax rate outside super, though the trade-off is limited access before your preservation age.
Informational content, not financial, tax, or legal advice. Verify amounts, limits, and current conditions directly with official sources (ATO, ASIC, APRA) before making a decision.
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