Compare Term Deposit Rates

A Guide to Term Deposits in Australia 

Term deposits are one of the simplest and most reliable investment options available to Australian investors. They involve investing money with a bank or financial institution for a fixed period, during which the funds earn a guaranteed rate of interest. This certainty makes them attractive for investors seeking stability, especially in uncertain markets. They are protected from market volatility as returns are locked in regardless of interest rate movements, whilst they also benefit from a government guarantee on deposits up to $250,000 per institution under the Financial Claims Scheme. Term deposits help investors diversify their portfolios by balancing higher-risk assets with a safe, income-generating option. For retirees, SMSFs, or conservative investors, they provide predictable cash flow, capital security, and peace of mind while still delivering competitive returns over short to medium time frames.

Comparing Term Deposits in Australia

Prior to investing in a term deposit, it’s important that investors know how to compare term deposits to allow them to make an informed decision.

How To Source and Compare Rates

Australian investors can find the best term deposit rates by comparing offers across banks, credit unions, and online lenders, as rates can vary significantly between institutions. Comparison websites and financial platforms make it easy to check current rates side by side, filter by deposit size and term length, and discover special promotions. 

Investors should consider whether they prefer monthly, quarterly, or annual interest payments, and check for any restrictions on early withdrawals, as these can impact flexibility. By shopping around and keeping an eye on Reserve Bank of Australia (RBA) interest rate trends, investors can secure competitive returns while aligning their term deposit with their cash flow needs and risk profile.

For context, here’s a chart comparing the average and best term deposit rates with the RBA’s cash rate since the start of 2024.

 

Term Deposit Rate Leaderboard: Top Rates for Key Terms

Here’s a table of the current top five term deposit rates available in Australia (as at October 2025):
 

Please note: Rates are subject to change. Please confirm with the provider before applying.

Understanding Term Deposits: A Secure Investment for Uncertain Times

In today’s volatile economic climate, Australian investors are often looking for stability and certainty. Many are prioritising capital security and predictable returns in the face of market volatility. Yet, standard savings account rates which are tied directly to the RBA’s cash rate can shift rapidly, making it difficult to plan with confidence. The challenge is that while term deposits allow savers to lock in a fixed rate and protect themselves from future cuts, they also mean missing out if rates rise. 

As Rachel Wastell of Mozo notes: 

‘It’s safe to say that the savers who acted early in the high-rate era of the last few years were the quiet winners. That slower cycle gave savvy savers time to lock in strong returns, and those who did are probably feeling pretty smug right now.’

The question for investors is how to secure the certainty term deposits offer without sacrificing opportunity. 

How Do Term Deposits Work in Australia

A term deposit is a fixed-term investment offered by Australian banks and other authorised financial institutions whereby you deposit a lump sum of money for an agreed period at a fixed interest rate. Because both the rate and the term are locked in, investors know exactly how much they will earn, making term deposits a safe and predictable way to grow their savings compared with variable-rate accounts.

In practice, term deposits work by requiring investors to commit a set amount of money, often with a minimum deposit requirement, for a chosen fixed term ranging from one month to several years. During this period, term deposit funds are locked away and cannot be accessed without penalties. The interest rate is guaranteed for the entire term, insulating savers from fluctuations in the RBA’s cash rate or market conditions. This combination of a fixed rate, a fixed term, and a fixed lump sum provides the certainty, security, and reliable returns conservative investors are aiming for.

Government Guaranteed Term Deposits: The Financial Claims Schemes

The Financial Claims Scheme (FCS) is an Australian Government initiative designed to protect depositors if a bank, credit union, or building society fails. It guarantees deposits of up to $250,000 per account holder per authorised institution, ensuring that most everyday savers can recover their money quickly and safely in the event of a collapse. The scheme is administered by APRA and activates only if the government declares it. 

If triggered, eligible deposits are paid out, usually within seven days, directly to customers, without the need for lengthy liquidation processes. By offering this safety net, the scheme underpins confidence in Australia’s financial system, reassuring term deposit investors that even in rare worst-case scenarios, their savings are secure up to the guaranteed limit.

As Judo Bank explains: 

‘Although it has only been activated once for a small general insurer in 2009, its existence helps to maintain confidence in the stability of the Australian financial system.’

What it covers: The FCS guarantees up to $250,000 per account holder, per institution. 

Types of Term Deposits Available in Australia

While the core concept is simple, term deposits come in five main variations to suit different investor needs:

• Fixed-Term Deposits: This is the standard type of term deposit whereby your money is locked away for a set period, typically from one month to five years, at a fixed interest rate, giving you certainty over returns. They are best for savers who have a defined horizon and don’t need access to their funds, such as someone saving for a planned large purchase or building a conservative portion of a portfolio. 
  As Moneysmart explains, a fixed term deposit ‘locks your money away for a set period, at a fixed interest rate.’ 
• Short-Term Deposits: These have terms of less than 12 months (e.g. 3, 6, or 9 months) while still providing a predictable return. They are ideal for near-term goals like a holiday fund or emergency buffer where you want better returns than a transaction account but may need access to your funds within a year. 
  According to The Mutual, shorter terms of 3, 6, or 9 months: ‘offer more liquidity while still providing a predictable return.’
• Long-Term Deposits: These lock your money away for one to five years at attractive interest rates as a reward for the longer commitment. They suit investors who don’t need their funds anytime soon, such as someone saving for a house deposit in several years. 
  The Mutual notes that longer commitments ‘typically attract higher interest rates.’
• Flexible or Redeemable Term Deposits: Some institutions offer variants that allow early access with shorter notice or structured flexibility, although this usually comes with reduced interest rates or penalties if broken. These are for investors who want the certainty of a term deposit but may need an emergency exit, understanding the trade-off in earned interest. 
  Judo Bank warns that early access options ‘usually come with reduced interest or penalties.’
• Business Term Deposits: These are designed for companies by accommodating larger deposit amounts and including features tailored to cash flow management such as varied term lengths and interest payment options. They give businesses a low-risk place to park surplus funds while earning a fixed return, balancing liquidity planning with return predictability. 
  NAB describes these products as a ‘low-risk way to earn a fixed return on surplus funds,’ while Westpac emphasises their value for ‘certainty and cash flow management.’ 

Term Deposit Benefits and Risks

Term deposits are a powerful tool for savers, but it’s crucial to understand both their benefits and their limitations:

Pros and Cons of Term Deposits

Helpful Advice: 

‘If you break a term deposit, you may miss out on interest earnings or pay an early withdrawal fee. Giving 31 days’ notice is usually required.’ 

NerdWallet Australia. 

💡Tip: Because the interest rate is locked in for the entire term, you have complete certainty over your earnings. Term deposits work well as a conservative foundation alongside other income-generating investments like dividend-paying shares, bonds, and income-focused managed funds—helping you build a diversified income portfolio that balances stability with growth potential.

Term deposits provide guaranteed returns and capital security under the Financial Claims Scheme. However, investors seeking higher yields without significantly increasing risk may wish to explore alternative income sources like mortgage funds, which typically offer higher returns in exchange for a longer investment horizon and different risk profile. Both can play complementary roles in a diversified income-focused portfolio.

Term Deposits vs. High-Interest Savings Accounts

A common dilemma for savers is choosing between a term deposit and a high-interest savings account. The best choice depends on your financial goals and need for flexibility:

Comparison Table: Term Deposits vs High Interest Savings Accounts

Helpful Advice: 

‘The key difference between term deposit rates and savings account rates, in terms of the growth of your nest egg in a higher rate environment, is that one is fixed, and one is variable.’

  Rate City

💡Tip: If you have a specific savings goal with a defined timeline (like a house deposit or a new car) and won’t need the cash unexpectedly, a term deposit’s fixed rate can provide valuable certainty. If you need an emergency fund or want the flexibility to access your money, a high-interest savings account is likely more suitable.

Case Study: The Real Cost of Breaking a Term Deposit

To understand the real-world impact of low liquidity, consider this common scenario…

Jack has been carefully saving $20,000 for a house deposit. Wanting certainty and a better return than a standard savings account, he locks his savings into a 1-year term deposit at an interest rate of 5.0% p.a. He expects to earn $1,000 in interest by the end of the year.

Six months later, an unexpected opportunity arises and Jack needs to access his savings early. His bank allows him to withdraw but applies an early withdrawal penalty:

1. The interest rate is reduced by 2.00% (from 5.00% down to 3.00%).
2. He is only paid for the 6 months his money was actually invested.

Term Deposit Early Withdrawal Penalties Explained

The early withdrawal penalty in the case study is illustrated below:

Table: Impact of Early Withdrawal

Note: This example is for illustrative purposes. Penalties vary between institutions.

💡 Tip: Early withdrawal penalties can significantly cut your returns. In this case study, Jack forfeited $700, or 70% of his expected earnings, by accessing his money early. If there’s a chance you’ll need your funds early, consider keeping part of your savings in a more flexible account, and only lock away what you’re confident you won’t need.

How to Invest in a Term Deposit: A Step-by-Step Checklist

Investing in a term deposit is a straightforward process. Follow this checklist to get started.

1. Define Your Savings Goal:

Start by being clear about your purpose. Are you saving for a holiday, building an emergency buffer, or setting aside money for a house deposit? 

Your goal determines both how much you can afford to lock away and how long you should choose for the term. 

For example, a six-month term might suit short-term savers, while those with longer horizons could consider a two- or three-year option.

💡 Tip: Only invest funds you won’t need to access during the term, as early withdrawals often trigger penalties.

2. Compare Term Deposit Rates:

Don’t just accept the rate offered by your everyday bank. Use online comparison tools to scan the market across the big four banks, regional banks, and credit unions. 

But as Moneysmart warns: ‘Comparison websites can be useful, but they are businesses and may make money through promoted links.’

Smaller providers often advertise higher rates to attract new customers, which can translate to hundreds of dollars in additional interest for you.

💡 Tip: Even an interest rate difference of 0.25% p.a. can add up. On a $50,000 term deposit, that’s an extra $125 per year.

Expert Advice: 

‘The smartest investors don’t just go with the bank they already use. Shopping around is the single easiest way to boost your term deposit return without taking on more risk.’ 

Darren Connolly, CEO, InvestmentMarkets

3. Read the Product Disclosure Statement (PDS):

This is the fine print that too many investors overlook. The PDS sets out the term deposit’s terms and conditions, and it’s vital you know what you’re signing up for. 

Pay close attention to:

• Interest payment frequency: Some accounts pay interest monthly (good for regular income), others annually or at maturity.
• Early withdrawal penalties: This can reduce your return significantly if you need access to your funds before the term ends.
• Maturity instructions: Will your money automatically roll into a new term, or will it be paid back to your linked account?

Common Mistake to Avoid: Skimming over the PDS can mean missing a clause that affects your returns. For example, automatic roll-overs might lock your money away for another term without you realising.

 4. Gather Your Documents:

Opening a term deposit is usually quick, but you’ll need the right paperwork ready, including:

• Proof of identity such as a driver’s licence or passport.
• Tax File Number (TFN): Supplying this ensures interest isn’t taxed at the highest marginal rate. As the ATO advises: ‘If your bank doesn’t have your tax file number (TFN), it will withhold tax from your interest at the highest marginal tax rate.’

Having these documents on hand streamlines the application process and avoids delays.

 5. Open an Account and Deposit Funds:

Once you’ve chosen your term deposit provider and read the fine print, it’s time to open your account. Most institutions allow you to do this online in under 10 minutes. 

After transferring your funds, your chosen term officially begins, and your money is locked in until maturity.

💡 Tip: Double-check the term length and instructions before transferring your money. Accidentally locking away funds you might need can lead to costly penalties.

6. Mark Your Calendar with Your Term Deposit Maturity Date:

Being aware of your term deposit maturity date is worthwhile. 

As Bede Cronin, Head of Rabobank Online Savings, explains: 

‘It’s always important to be aware of what is happening with your money. Set a reminder for when your term deposit is due to mature or rollover. Also remember that if your term deposit automatically rolls over you have a grace period, usually ranging from seven to 14 days, after the term deposit matures to withdraw your funds or reinvest for a different term without penalty.’

A Common Mistake to Avoid: Forgetting to give instructions for maturity. Many term deposits will automatically ‘roll over’ into a new term if you don’t provide instructions. This new term might be at a much lower, non-competitive interest rate. So set a calendar reminder one month before your term ends to review your options and give new instructions.

Tax Implications for Australian Investors

How Interest is Taxed

• Interest is taxable income: ‘If you’re an Australian resident and you receive interest, you must declare it as income. Interest income includes: interest you earn from financial institution accounts and term deposits … interest we pay or credit to you.’ ATO

As shown below, the tax impact of term deposit interest trends upwards in line with your taxable income:

• When to declare it: ‘For term deposits this usually means you should declare interest in the year the investment matures. If you elect to roll over your investment or if the financial institution automatically reinvests the term deposit at maturity, you will need to declare the interest earned as at the rollover or reinvestment date.’ ATO
• Joint account tax treatment: ‘If you hold assets jointly with another person, it is assumed that income of the asset is divided equally.’ ATO
• And for filling out returns: ‘For each account where interest hasn’t pre-filled in your tax return … Joint accounts: show the number of account holders, the total gross interest and total TFN amounts withheld. myTax will divide the amounts equally between the number of account holders.’ ATO
• TFN (Tax File Number) disclosure matters.

You should give your TFN to the bank or financial institution when you open the term deposit. 

‘If your bank doesn’t have your tax file number (TFN), it will withhold tax from your interest at the highest marginal tax rate.’ ATO

• Expenses and deductions: ‘To claim a deduction for expenses you incurred in earning interest income, you must have incurred expenses in earning interest from any source in Australia. This includes accounts and term deposits held with financial institutions.’ ATO

Tax Traps: What to Watch Out For

Missing interest because of rollover: Even if you don’t physically get the interest (because it’s automatically rolled into the deposit), you must still declare it in the year it is credited or rolled over. 

Joint ownership confusion: If you own a term deposit jointly but don’t split the interest equally (for example, one put more money in), you need clear records to show who is entitled to what. Otherwise the default assumption may work against you. 

Not providing your TFN: If you don’t supply your TFN, you could lose more to tax than necessary (because withholding is at highest rate) and then have to sort out refunds later. 

Over-lapping financial years: If you have a long-term deposit, and interest ‘builds up’ before maturity, sometimes the timing of when interest is credited versus when it matures can lead to confusion in which year you declare it. You don’t want to accidentally omit it or declare it in the wrong year.

Record-Keeping Tips

• Keep statements showing the gross interest earned (not just net after fees/tax), and dates when interest is credited or when the term matures or is rolled over.
• Keep documents that break down joint accounts (how much each person contributed, or what share of interest each gets) if the split isn’t 50/50.
• Keep copies of any fees or expenses you think may be deductible, plus proof of TFN submission or any withholding that occurred (if TFN was missing).
• Retain records for at least 5 years after you lodge your tax return. That’s how long the ATO may want to check things. 

Tip: Your bank will send you an annual statement summarising the interest earned. Keep this statement with your other tax documents to make lodging your return easy.