Term deposits, answered

The basicsreviewed 15 Sep 2026

1. What is a term deposit?

   A deposit with a bank for a fixed time at a fixed interest rate. The rate is set for the whole term, and getting the money out early depends on the product’s notice and interest-reduction terms.

2. Are term deposits worth it?

   A term deposit gives a fixed rate for an agreed period, with eligible deposits covered by the government guarantee up to $250,000 per account holder per institution. Whether that is worth it depends on when you need the money and on the return after tax and inflation.

3. Term deposits vs savings accounts

   A term deposit fixes the rate and restricts access for the term. A savings account keeps the money available and lets the bank change the rate, often with conditions attached to the best rate.

4. Tax on term deposit interest

   For an Australian resident, interest is ordinary income, declared in the year the bank pays or credits it and taxed at your marginal rate. If you have not quoted a tax file number, the bank withholds tax at the top marginal rate plus the Medicare levy once the interest reaches $120 in a year.

5. The Financial Claims Scheme: how deposits are guaranteed

   The Australian Government guarantees eligible deposits at Australian-incorporated banks, building societies and credit unions up to $250,000 per account holder per institution. If the Government activates the scheme after an institution fails, APRA administers the payments.

6. What is an ADI?

   An authorised deposit-taking institution is a body corporate that APRA has authorised to carry on banking business under the Banking Act 1959. Every bank, building society and credit union in Australia is one, and only Australian-incorporated ADIs are inside the deposit guarantee.

7. What affects term deposit rates?

   Mostly the cash rate and what markets expect it to do next, priced through bank bill swap rates, plus each bank’s need for deposit funding. That is why rates at different terms move at different times and by different amounts.

8. Breaking a term deposit early

   Early withdrawal depends on the product: many term deposits require 31 days’ notice, and the interest paid on the withdrawn amount is reduced, sometimes to nothing. The notice period became common after a 2015 change to bank liquidity rules.

9. Maturity and rollover: what happens when a term deposit ends

   At maturity the bank follows the product’s terms and your instructions: paying the money out, renewing it for another term, or holding it. Without instructions, Moneysmart warns, a deposit may roll over at a lower rate. Grace periods differ by product.

10. Term length and returns: how long to lock in

    Longer is not automatically better paid: banks price each term on where they expect rates to go. The term that ends when the money is needed avoids an early break, and a ladder across several terms spreads the reinvestment dates.

11. Joint term deposits

    Two or more people can hold one term deposit. Each holder declares their share of the interest, the guarantee splits the deposit equally between holders and adds each share to that holder’s other deposits at the institution, and who can withdraw depends on the account’s signing arrangement.

The rates these answers refer to