Australia Proposes Reduced Tax On Savings

by Mary Swire, Tax-News.com, Hong Kong

13 July 2011

Australian Assistant Treasury Bill Shorten has published a discussion paper on the government proposal to reduce by 50% the taxation of interest income on savings, as proposed in the 2010-11 Budget.

"The introduction of the discount will benefit more than five million taxpayers, with particular benefits for low- and middle-income savers who are more likely to put their savings into banks, credit unions or building societies, rather than investments," Shorten said.

"A tax discount for interest income is an important step towards a more consistent taxation regime for savings," he added.

In 2012-13, individuals will be entitled to a tax discount equal to 50% on up to AUD500 (USD529) of interest income received, rising to AUD1,000 of interest income received each year from July 1, 2013.

The discount will apply to interest received from deposits held with any bank, building society or credit union, as well as interest on bonds, debentures and annuity products.

"If you are an average income earner and have AUD10,000 savings in an account that earns 5% interest, you will only pay around AUD80 of tax on the interest income in 2012-13, compared to around AUD160 if this measure is not passed," Shorten said.

"The tax discount for interest income will improve incentives for individuals to put their money into interest-bearing savings accounts, reducing some of the discrepancies in tax treatment that currently exists between different investment and savings options. I encourage interested taxpayers and others to make submissions to the discussion paper," he added.

This measure is part of the government's Simpler, Fairer, Stronger tax reform package, and is contingent on the passage of the Minerals Resource Rent Tax legislation, Shorten explained.

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