Tax on deposits slashed from 2011
Interest paid on low value bank deposits and comparable savings will be subject to a reduced rate of tax from July 2011, the Australian government said last night.
The measure was announced in the budget. Income from bank deposits will be taxed at 50 per cent of the marginal rate of tax that the taxpayer would otherwise pay. The reduced interest will apply on the first $1000 in interest income earned in any year. Based on current interest rates this means that the maximum tax cut applies to deposits of around $15,000. Higher income earners paying tax at the highest marginal rate will reap a bigger benefit than those on lower tax rates.
The tax benefit also applies to interest earned on bonds, debentures or annuity products. The tax benefit applies to individuals and includes savings held through a trust or managed investment scheme. The government said it expected to reduce tax on interest earned by 5.7 million depositors, and estimated the loss in tax revenue at around $500 million.