Is my money safe in an Australian bank?

Yes, up to a limit. The Financial Claims Scheme guarantees up to $250,000 per person, per bank, building society or credit union licensed by APRA, if it fails. Investments, super and crypto aren’t covered.

Do I pay tax on savings interest?

Yes. Interest is added to your taxable income and taxed at your marginal rate, plus the 2% Medicare levy. Your bank reports it to the ATO, so it’s pre-filled in your tax return. If you haven’t given your bank your TFN, it withholds 47%.

Is an offset account better than a savings account?

If you have a home loan, usually yes. Money in an offset saves interest at your loan rate, and the saving isn’t taxed. In our example, $20,000 in an offset leaves you about $650 better off over a year than in a savings account at 4.5%.

Should I use a term deposit?

A term deposit fixes your rate for a set time, so it suits money you know you won’t need. To take money out early you usually give 31 days’ notice and earn less interest.

Banking basics in Australia: everyday accounts and savings

Everyday account vs savings

	Everyday account	Savings account
What it’s for	Bills, your card, your pay	Money you’re not spending yet
Interest	Little or none	Some: compare the rate and conditions
Getting at it	Any time	Easy, but kept apart so it lasts

Have your pay go into your everyday account, then set up an automatic transfer to savings on payday. Saving first, before you spend, is the easiest way to make saving happen.

What to look for

No monthly account fee. Most banks offer one, especially online.
Fee-free ATMs and no overseas transaction fees if you travel.
A good savings rate, and conditions you’ll actually meet. Bonus-rate accounts often drop to a very low base rate if you miss a deposit or make a withdrawal.
Introductory rates that end after a few months: diarise when they finish.
PayID, so you can pay and be paid with a phone number or email, usually within seconds. Check the name that comes up before you send money.

Savings, offset or term deposit?

Interest on savings is taxed at your marginal rate, plus the Medicare levy, and your bank reports it to the ATO.

If you have a home loan, an offset account can be better than savings: every dollar in it reduces the interest on your loan, and interest you don’t pay isn’t taxed.

$20,000 kept for a year: savings or offset? Illustrative rates, on a 30% tax rate plus the Medicare levy

Savings account at 4.5% $919 of interest, taxed at 32%: $625
Offset account, home loan at 6.2% Interest you don’t pay on your loan, with no tax: $1,276

The offset leaves you $651 better off over the year

An offset account only helps if you have a home loan. Rates change often: compare your own savings rate with your loan rate after tax.

A term deposit locks in a rate for a set time, from a month to several years. It suits money you won’t need, because taking it out early usually means giving 31 days’ notice and earning less interest.

Is my money safe?

The Australian Government’s Financial Claims Scheme protects deposits up to $250,000 per account holder, per authorised deposit-taking institution (ADI) if it fails. That includes banks, building societies and credit unions licensed by APRA.

Some brands share one banking licence, so the cap covers them together. Investments, super and crypto aren’t covered by the scheme.

Fees to avoid

Dishonour fees when a payment bounces because there isn’t enough in your account.
Overdrawn account fees and interest.
Paper statement and branch fees on some accounts.

Keep a small buffer, turn on low-balance alerts, and check your statement each month.

What next

Work out where your money goes with a budget, then start an emergency fund in your savings or offset account. The savings interest calculator shows what you’d keep after tax.