Bank account fees are tax deductible when the account is used to earn income, but not when the account is purely private. The rule follows a simple principle that runs through the whole tax system: you can deduct an expense if it was incurred in earning assessable income. So account-keeping fees on an account that earns interest you declare, or on a business account, are deductible, while the fees on an everyday personal transaction account that earns nothing are not. The ATO specifically allows a deduction for account-keeping fees on an account held for investment purposes, which is the key to the answer. The size of the deduction is usually small, but it is worth claiming where it applies, and worth understanding so you claim it correctly rather than claiming fees you are not entitled to.
The deciding question: does the account earn income?
Whether a bank fee is deductible comes down to what the account is for. If the account produces assessable income, the fees of running it are a cost of earning that income and are deductible. If the account is just where you keep your money for personal use, the fees are a private expense and are not deductible, in the same way your personal grocery or phone costs are not. The account’s purpose, not the fee itself, is what decides it.
This is why the same type of fee can be deductible for one person and not another. A monthly account-keeping fee on a savings account that earns interest you declare is deductible; the identical fee on a transaction account you use only for daily spending is not. The fee is the same; the use of the account is different, and the use is what matters.
Fees on an account that earns interest
The clearest case where bank fees are deductible for an individual is an account held for investment purposes, such as a savings account or income bond that earns interest. The ATO allows you to claim a deduction for account-keeping fees you incur on an account held for investment purposes, and you will usually find these fees itemised on your statements. Because the interest that account earns is assessable income, which our guide on how interest on savings is taxed explains, the cost of keeping the account is deductible against it.
In practice the deduction is modest, since account fees are small, but it is legitimate and often overlooked. If you hold a savings account that pays you interest each year, check the statements for any account-keeping fees and include them as a deduction. One point to note: on a joint account you can only claim your share of the fees, so for an equally held account you claim half.
Fees on a private account are not deductible
The flip side is that fees on a purely personal account are not deductible. If your everyday transaction account earns no interest and exists only for your private spending, its account-keeping fees, overdrawn fees, and similar charges are private expenses with no connection to earning income, so there is nothing to claim. This is the most common situation, which is why most individuals have no bank fee deduction at all. Trying to claim private account fees is a mistake, not a saving.
Business account fees are deductible
For a business, the position is more generous and more straightforward, because a business account exists to run the business, which produces assessable income. Account-keeping fees, merchant fees, and similar bank charges on a business account are generally deductible business expenses, the same as other costs of running the business. This holds across business structures, and the way the related interest income is then taxed is covered in our guide on whether business savings accounts are taxed.
The important discipline for a business is keeping business banking separate from personal banking, so the deductible fees are cleanly identifiable and you are not trying to untangle private spending from business costs at tax time. Our guide on what your accountant needs for your business tax return covers the records that make this simple.
Mixed-use accounts and bank charges on loans
Two situations need a little care. If an account is used for both private and income-producing purposes, only the portion of the fees relating to the income-producing use is deductible, so some apportionment is needed, and it is worth advice if the split is not obvious. Separately, bank fees and charges connected to a loan taken out for income-producing purposes, such as an investment loan, generally follow the deductibility of that loan, so charges on a genuine investment loan are typically deductible while charges on a private loan are not. The guiding test is always the same: is the cost tied to earning assessable income.
