Australian Compound Interest Calculator

The Financial Claims Scheme is an Australian Government scheme that protects deposits up to A$250,000 per account holder, per Authorised Deposit-taking Institution (ADI), in the event the institution fails. It covers banks, building societies and credit unions incorporated in Australia and authorised by APRA.

Joint accounts: each holder is entitled to the A$250,000 limit on their share. If two people hold a joint account with A$400,000, each is treated as having A$200,000 — both fully covered. The FCS only covers Australian-dollar deposits and is administered by APRA, which aims to return funds within 7 calendar days of activation.

Splitting larger savings across multiple ADIs (under different banking licences) can increase total protection. Some banks share a single ADI licence; APRA's register of ADIs shows which institutions hold separate licences.

A bonus rate is extra interest (typically 1–3%) paid on top of the base rate when monthly conditions are met — common requirements include depositing A$500–A$2,000 per month, making no withdrawals, or growing the account balance.

A honeymoon (introductory) rate is a higher rate offered for a limited period (typically 3–4 months) when opening a new account. After the honeymoon period, the rate reverts to the standard rate, which is often much lower.

If conditions are missed in any month, only the base rate applies — sometimes under 1%. The ongoing rate, rather than the introductory headline rate, determines returns after the honeymoon period.

The RBA cash rate is the benchmark for short-term interest rates in Australia. When the cash rate rises, banks typically lift savings rates and term deposit rates (though not always by the full amount). When it falls, savings rates generally drop.

The current cash rate target is 4.35% (effective 6 May 2026). Based on RBA Retail Deposit and Investment Rates (Table F4), banks' bonus savings accounts average around 4.80% p.a. and 1-year term deposits around 5.05% p.a.

Because savings rates can change at any time, the ongoing rate — not the introductory rate — determines long-term returns.

Term deposits lock funds for a fixed period (1 month to 5 years) at a fixed rate that doesn't change with the RBA cash rate during the term. Interest can typically be paid:

• At maturity (most common for short terms)
• Monthly, quarterly or half-yearly
• Annually (often required on terms 1+ year)

If interest is paid and reinvested back into the term deposit, it compounds. If paid out to a separate account, the deposit earns simple interest only on the original principal. Early withdrawal usually triggers an interest reduction and may require 31 days' notice.

With daily compounding, interest is calculated on the closing balance every day and added to the balance — usually paid out monthly. With monthly compounding, interest is calculated and added to the balance once a month.

The practical difference is small for most savers — at 5% over 12 months on A$10,000, daily compounding earns about A$13 more than annual compounding (A$512 vs A$500). Most Australian high-interest savings accounts use daily compounding.

The Super Guarantee rate for 2025–26 is 12% of ordinary time earnings (OTE), effective from 1 July 2025. This is the final scheduled increase under current legislation — the rate stays at 12% from 1 July 2025 onwards, with no further legislated rises.

The maximum contribution base for 2025–26 is A$62,500 per quarter (A$250,000 per year equivalent) — employers are not required to pay SG on earnings above this cap, though many awards and contracts pay it on full earnings. From 1 July 2026, Payday Super begins, requiring SG to be paid with every pay run rather than quarterly.

Concessional contributions are pre-tax (before-tax) contributions: employer SG, salary sacrifice and tax-deductible personal contributions. They are taxed at 15% inside super rather than at the marginal rate. Cap: A$32,500 per year (2026–27).

Non-concessional contributions are after-tax contributions made from net income. No tax applies on the way in. Cap: A$130,000 per year (2026–27), with bring-forward rules potentially allowing up to A$390,000 over three years for those under 75 with a Total Super Balance below the relevant cap.

Exceeding caps incurs additional tax. The general transfer balance cap (the max that can be moved into the retirement phase) is A$2.1 million from 1 July 2026.

The ASFA Retirement Standard (December quarter 2025) estimates the lump sums needed at age 67 for a comfortable retirement, assuming home ownership and a part Age Pension:

• Single: A$630,000 (about A$54,840 p.a.)
• Couple: A$730,000 (about A$77,375 p.a.)

For a more modest retirement (largely covered by the Age Pension), the lump sums are A$110,000 single and A$120,000 couple. The ASFA Retirement Standard is published quarterly and is available via ASIC MoneySmart.

Targets assume retiring at 67, life expectancy of around 85, and full home ownership. Renters need significantly more.

Preservation age is the earliest age super can be accessed when permanently retired. For anyone born on or after 1 July 1964, preservation age is 60. From age 65, super can be accessed regardless of work status.

Once a "condition of release" is met (typically retirement at preservation age, or turning 65), super can be drawn as a lump sum or income stream. From age 60, withdrawals from a taxed super fund are generally tax-free (non-assessable, non-exempt income).

Salary sacrifice is an arrangement where pre-tax salary is redirected into super, reducing taxable income. Contributions go in at the concessional 15% tax rate rather than the marginal income tax rate (up to 47% for top earners), creating a tax saving on every dollar sacrificed.

All salary-sacrifice contributions count toward the A$32,500 concessional cap, alongside employer SG. Anyone earning above A$250,000 may be subject to Division 293 tax — an additional 15% on concessional contributions, bringing the effective tax to 30%.

Those eligible may also use carry-forward unused concessional cap amounts from the previous five years, provided their Total Super Balance is under A$500,000 at the prior 30 June.

Yes. Interest from a joint account is treated as split equally between account holders for tax purposes, unless evidence shows a different ownership split.

Each holder reports their share on their tax return at their marginal income tax rate. Banks report interest paid to the ATO via the Annual Investment Income Report (AIIR), which pre-fills tax returns automatically — meaning unreported interest is easy for the ATO to detect.

For children's accounts, who declares the interest depends on who owns or uses the funds, not whose name is on the account. Children pay much higher tax rates on unearned income above A$416 to discourage income-splitting.

If a Tax File Number (TFN) is not provided, the bank must withhold tax from interest at the top marginal rate plus Medicare Levy — currently 47%. This is called TFN withholding tax.

The amount withheld can be claimed back through a tax return, but it ties up money throughout the year. Where a TFN is provided, no withholding applies and interest is taxed at the holder's marginal rate. On joint accounts, TFN withholding applies separately to each account holder who has not provided a TFN.

Australian residents pay tax on a progressive marginal scale for 2025–26:

• A$0 – A$18,200: 0% (tax-free threshold)
• A$18,201 – A$45,000: 16%
• A$45,001 – A$135,000: 30%
• A$135,001 – A$190,000: 37%
• A$190,001 and above: 45%

Plus the 2% Medicare Levy on most taxable income. The top marginal rate including Medicare is 47%.

From 1 July 2026, the 16% bracket reduces to 15% (Stage 3+ phase 2), saving every taxpayer earning above A$45,000 up to A$268 per year. The bracket reduces further to 14% from 1 July 2027.

For Australian-resident individuals, a 50% Capital Gains Tax (CGT) discount applies to capital gains on assets held for 12 months or longer before disposal. The discount applies to shares, ETFs, managed funds, investment property, cryptocurrency and most other CGT assets.

For super funds in accumulation phase, the discount is one-third (33.3%). The discount does not apply to companies. Capital losses can offset capital gains in the same year, with unused losses carried forward indefinitely. The discount is automatic — no application is required when reporting the gain.

Inflation reduces the real value of money over time. The RBA targets 2–3% inflation over the medium term. If a savings account earns 4% nominal and inflation is 5%, real return is approximately -1% — meaning purchasing power has fallen even though the dollar balance has grown.

Over 20 years at 3% average inflation, A$100 today has the equivalent purchasing power of around A$55. Investments that have historically outpaced AU inflation include diversified Australian and international shares, listed property, and inflation-linked bonds — though all carry investment risk and past performance does not indicate future results.