A term deposit is a fixed-rate savings product where you lock away a lump sum for a set period — typically 1 to 24 months — and receive a guaranteed interest rate in return. Unlike a savings account, the rate cannot change during the term.
- 1. Fixed rate, fixed term. When you open a term deposit, the interest rate is locked in for the full term. Whether rates rise or fall in the market, your rate stays the same — giving certainty at the cost of flexibility.
- 2. Interest payment frequency. You can typically choose to receive interest at maturity (all at once), monthly (paid into a linked account each month), or annually (for longer terms). For terms under 12 months, monthly and at-maturity options pay the same total amount.
- 3. Early withdrawal penalty. Breaking a term deposit early typically attracts a penalty — usually a reduction in the interest rate (often 50% of the advertised rate) for the period held. Some providers require 31 days notice. Always check the early exit conditions before committing.
- 4. Tax on interest.Interest earned is assessable income in Australia. It's added to your taxable income and taxed at your marginal rate. There is no special concessional rate for term deposit interest — unlike dividend income, which can carry franking credits.
- 5. APRA government guarantee ($250k). All deposits at APRA-regulated banks, building societies, and credit unions are protected up to $250,000 per account holder per institution under the Financial Claims Scheme. This makes term deposits one of the lowest-risk investments available.
- 6. Maturity and rollover. When the term ends, your bank will usually offer to automatically roll over the deposit at the current rate. If rates have moved, this could be higher or lower than your original deal. Always review rollover offers — and use this calculator to model the new rate before accepting.