Memphis

Hi thereI was just wondering whether anybody with this particular account or a similar online savings account knew whether:1) Tax is deducted from the interest earned before being applied to my account;or2) I have to declare this account and interest earned on my tax return because it is considered income and the tax office (Australian Taxation Office) will send me a tax bill.I work in superannuation where tax is deducted before interest/unit prices are declared so I figure option 1) would make the most sense. I have provided BankWest with my tax file number to avoid withholding tax at 48.5% so that is not an issue. However, I could not find anything in their Product Disclosure Statement about tax on interest earned.Can someone in the know please confirm?Thanks

B

HiThe answer is number 2. Unless you have not provided the bank with your TFN (in which case the bank will have to withhold amounts at the top rate + medicare levy (47.5% now)), the bank is not required to withhold tax from the interest you earn. If you think about it, the bank is not in a position to withhold tax from your interest, even if it wanted to, because the amount of withholding would depend on your personal marginal tax rate, which the bank would not be aware of. Super funds can do report on an after-tax basis because they are subject to a flat rate.So I can confirm that the interest should be included in your tax return as income. (I note that it would be unwise not to declare it, as this amount is very easy for the ATO to data-match, given that you have lodged your TFN with the bank).CheersB