Every Australian is lumped with a tax on savings they deposit into a bank. Tax must be paid on any interest earned, not the amount deposited. In fact, the effective tax rate (considering inflation) on cash deposited into a bank is about 50 percent for people with a middle income, according to the Federal Treasury Secretary, Ken Henry. This is why it is so important to shop around for savings accounts that earn the highest interest rates with the lowest fees.
Savers could be rewarded, following the Henry Tax Review. One of the aims of the review is to have a fairer balance on the tax on savings, as deposit accounts comprise the heaviest burden for taxes. This is good news for savers and will mean that earning the highest interest rate on the market will leave more money in your pocket after your tax on savings.