Interest on a joint bank account is split equally between the account holders, and each person declares their share in their own tax return and pays tax on it at their own marginal rate. For a typical two-person account that means half each: if the account earns $1,000 in interest, each holder declares $500. The ATO treats the interest as shared equally by default, and myTax divides it automatically. The only time it works differently is when the money is genuinely owned in unequal shares, in which case you can split the interest to match, as long as you keep a record of how you worked it out.
How is the interest split?
By default, the ATO divides the interest equally among the number of account holders. Two names means half each, three names means a third each, and so on. Each holder then declares their share, not the whole amount, on their own return. When you lodge through myTax, it takes the total interest the bank reports and splits it evenly between the holders for you, so for most couples there is nothing extra to do.
Does it matter whose name is first?
No. A common worry is that the first name on the account, the primary holder, has to declare all the interest. That is not how it works. The order of names does not change who is taxed. The interest is shared between the holders regardless of whose name appears first, and each person declares only their own share.
What if you do not own the money equally?
Sometimes a joint account is not really owned 50/50. One partner may have deposited all the money while the other is simply added for convenience. In that case you can split the interest to reflect who actually owns the funds, rather than the automatic equal split. The ATO allows this, but the catch is evidence: if your split is not equal, you need to keep a record of how you worked out each person’s share, in case the ATO asks. Without that record, the default equal split applies.
A quick example
Say Sam and Alex have a joint savings account that earns $1,200 in interest for the year. By default, each declares $600. If Sam is on the top tax rate and Alex earns nothing, they still each declare $600, because the account is held jointly and is treated as equally owned. If, on the other hand, the $1,200 came entirely from money Alex owned, and they can show that, Alex could declare the full $1,200 and Sam nothing. The paperwork is what makes the difference.
Do you both need to lodge for it?
Each holder reports their share on their own return, so in a couple both people include their half. If one holder has very little other income and their share of interest keeps their total under the tax-free threshold, they may not need to lodge at all, though it is worth checking. If the bank withheld tax because a TFN was missing, that person should lodge to claim it back, even if they would not otherwise have to.
Joint accounts and tax for couples
This is where a lot of couples miss a trick. Because a joint account is split equally, half the interest is taxed in the higher earner’s hands, at their higher rate. If one of you earns much less, holding the savings in the lower earner’s own name, rather than jointly, means more of the interest is taxed at the lower rate, and possibly not at all if they stay under the tax-free threshold. It only works if the money genuinely belongs to that person, so it is worth planning before you open or restructure accounts. Our tax planning checklist is a good place to start.
What about TFNs and children’s accounts?
Every account holder should give the bank their tax file number. If the account does not have a TFN for a holder, the bank may withhold tax from the interest at the top rate of 47%, which that person then has to claim back. For an account held jointly with or for a child, who declares the interest depends on who really owns and uses the money, not just whose name is on it. If a parent controls and spends the funds, the parent generally declares the interest.
