Interest on Australian Bank Accounts: What is the tax payable to the ATO by Australian Expats?
- Mitchell Kelsey
- Apr 7
- 4 min read
As an Australian Expat, the tax payable to the Australian Tax Office (ATO) on your bank account interest depends on several factors, primarily your residency status for tax purposes. In this blog post, we provide a general breakdown on how the interest is treated and what is the tax payable to the ATO by Australian Expats.
Tax Residency Status in Australia
The ATO determines the tax payable on your bank interest based on whether you're considered a resident or non-resident for tax purposes in Australia. This is separate from your citizenship or visa status in Australia, and is influenced by factors such as your permanent place of residence, ties to Australia (e.g., family, property, and business), and the duration of your stay abroad. Learn more about the Australian Tax Residency Rules.
Non-Resident for Tax Purposes: If you're a non-resident for tax purposes, you will only be taxed on income sourced within Australia, which includes interest from your Australian bank accounts. However, non-residents do not receive the tax-free threshold, and interest income is subject to withholding tax.
Australian Resident for Tax Purposes: If you are still classified as a tax resident of Australia while living abroad, you will generally be taxed on your worldwide income, including interest earned on your Australian bank accounts. The tax payable to the ATO will be based on your marginal tax rate, which can range from 0% to 45%, depending on your total income.
Interest Taxation for Non-Residents
If you are a non-resident for tax purposes, the tax payable to the ATO by Australian Expats is typically only the withholding tax rate. The withholding tax rate on interest paid to non-residents is 10%. This is a final tax, and your financial institution will usually withhold the tax on your behalf before paying you the interest.
Interest Taxation for Residents
If you're still considered a resident for tax purposes, the interest you earn on your Australian bank accounts will be added to your total taxable income, and the tax payable to the ATO will be determined by your marginal tax rate. The first $18,200 of your income is tax-free, but this threshold does not apply to non-residents.
Foreign Income and Double Taxation
If you're living overseas and continue to earn interest from your Australian bank accounts, you may also be liable for tax in the country where you're residing. However, Australia has Double Tax Agreements (DTAs) with several countries, which may prevent you from being taxed on the same income in both Australia and your country of residence. Under these agreements, you may be able to claim a foreign tax credit or an exemption in your host country to reduce the possibility of double taxation.
Reporting to the ATO
Your reporting requirements and the tax payable to the ATO by Australian Expats will primarily depend on your tax residency status. If you remain a resident for tax purposes in Australia, you are generally required to report your worldwide income on your Australian tax return, including interest from your Australian bank accounts. If you are a non-resident, your bank will withhold the relevant 10% tax from interest and remit this to the ATO on your behalf. As this is a final tax, the interest does not need to be reported on an Australian Tax return.
What You Should Do:
Check your residency status with the ATO to determine whether you're classified as a resident or non-resident for tax purposes.
Ensure your bank withholds the correct tax if you're a non-resident. You will need to notify your bank of your non-resident tax status.
Australian tax return (if required) to report your interest income and any other income sources. If your only Australian-sourced income is interest income, you may no longer need to file an Australian tax return.
Seek professional advice from a licensed professional, such as an Expat Financial Adviser or Tax Accountant, to discuss your situation.
In summary, the tax payable to the ATO by Australian Expats on bank interest will depend on your tax residency status. By ensuring your residency status is correctly noted with your Australian financial institutions, you can save time and money when filing an Australian tax return and ensure your tax records in Australia remain compliant.
Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.
If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the below link:
General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.
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