Helping Australians save

Saving for the future

The Government recognises how important savings are for family security and the Australian economy.

To help Australians get more from their savings, the Government will introduce a tax discount for interest income, including on deposits.

A discount for interest income

From 1 July 2011, Australians will receive a 50 per cent discount on up to $1,000 of interest, including interest earned on deposits, bonds, debentures and annuity products.

This will improve incentives for Australians to save for their future.

The discount for interest is expected to help 5.7 million people in 2011‑12, three quarters of whom will have annual incomes below $80,000.

The discount means interest income will receive a similar tax treatment to capital gains on assets held longer than a year.

This will be of particular benefit to small savers, especially older Australians, who are more likely to put extra non‑superannuation savings into interest‑earning deposits.

It will allow their savings to grow faster.

Supporting competition in the banking sector

The discount can be expected to increase the available pool of deposits, which are a particularly important source of funding for smaller banks, building societies and credit unions.

This will help them to put more competitive pressure on the big banks over time.

Further, allowing a discount on corporate bonds will promote this alternative source of funding for businesses, reducing their reliance on banks.