Term Deposits Australia — Complete Guide to Safe, Fixed-Rate Investing (2026)

Term deposits are one of Australia’s most straightforward investment options — deposit a fixed amount for a set period, earn a guaranteed interest rate, and receive your money back at maturity. This hub covers everything Australians need to know about term deposits in 2026.

What Is a Term Deposit?

A term deposit is a fixed-term, fixed-rate savings product offered by banks, credit unions, and building societies. You agree to lock your money away for a set period — from one month to five years — in exchange for a guaranteed interest rate higher than a standard savings account.

Term deposits are covered by the Australian Government’s Financial Claims Scheme (FCS) up to $250,000 per depositor per authorised deposit-taking institution (ADI) — making them one of Australia’s safest investment options for amounts up to that threshold.

How Term Deposits Work

1. Choose a bank or financial institution
2. Select a deposit amount (typically minimum $1,000–$5,000)
3. Choose a term (1 month to 5 years)
4. Accept the quoted interest rate (fixed for the term)
5. Your money is locked away until maturity
6. At maturity: receive principal + interest; roll over or withdraw

Interest may be paid monthly, quarterly, annually, or at maturity — depending on the product and institution.

Current Term Deposit Rate Environment (2026)

Term deposit rates in Australia follow the RBA cash rate closely. As of 2026, following the RBA rate cycle, competitive term deposit rates from mid-tier banks (ING, Macquarie, Judo Bank) have ranged from approximately 4.5–5.5% for terms of 6–12 months — significantly higher than the 0.10% cash rates of 2021.

Always compare current live rates before locking in — rates change frequently. For current comparison, use financial comparison sites or approach institutions directly.

Who Are Term Deposits For?

Term deposits suit investors who:

• Prioritise capital security over growth
• Have a known future expense (holiday, home deposit, car) within a set timeframe
• Want predictable income in retirement
• Hold excess cash beyond their emergency fund
• Are close to retirement and reducing portfolio risk

Term deposits are generally not appropriate as a primary long-term wealth-building strategy — their returns historically lag the inflation-adjusted returns of shares and property over 10+ year periods.

In This Section

Related Sections

• Bonds Australia
• Income Investing Australia
• Banking Australia
• Investing hub

How to Compare Term Deposit Rates

Not all term deposits are equal — beyond the headline rate, compare:

The rate — Rates vary significantly between institutions. The major banks (CommBank, ANZ, Westpac, NAB) typically offer lower rates than mid-tier competitors. Institutions like Judo Bank, ING, Macquarie, and AMP Bank often offer the highest rates to attract deposits.

The term — Rates vary by term length. The highest rates are usually found at 3–12 month terms. Longer terms (2–5 years) do not always pay more — the yield curve can be flat or inverted.

Interest payment frequency — Interest paid at maturity is simpler but ties up the income. Monthly or quarterly interest payments suit income-seeking retirees.

Rollover terms — What happens at maturity? Most banks automatically roll over to a new term deposit at the then-current rate (which may be lower or higher). You have a grace period (typically 7–14 days after maturity) to redirect funds without penalty.

Break penalties — If you need access to funds before maturity, the bank will reduce the interest rate (commonly to 0% or close to it on the interest earned to that point). Always check the early withdrawal terms before locking in.

Term Deposit Ladder Strategy

A term deposit ladder spreads your deposit across multiple terms maturing at different times. This provides regular liquidity while still capturing term deposit rates.

Example ladder ($100,000 total):

When each deposit matures, you reinvest it into a new 12-month term — maintaining the ladder. This approach avoids having all your money locked away simultaneously while still earning term deposit rates.

Tax on Term Deposit Interest

Term deposit interest is assessable income in the year it is received (or credited to you). For deposits where interest is paid at maturity, the income is assessed in the financial year the deposit matures — not spread over the term.

This creates a timing consideration: a 12-month deposit maturing on 30 June is assessed in the year ending June 30; one maturing on 1 July is assessed in the following year. If you expect to be in a lower tax bracket next year (e.g., approaching retirement), timing maturities can modestly reduce tax.

Frequently Asked Questions

Are term deposits protected by the Australian government?

Yes — term deposits with APRA-regulated authorised deposit-taking institutions (ADIs) are covered by the Financial Claims Scheme (FCS) up to $250,000 per depositor per institution. This cap applies separately to each bank — so $500,000 across two different ADIs is fully protected. Most credit unions and building societies are also ADIs covered by the FCS. Always verify FCS eligibility on the APRA website before depositing.

Should I lock in a term deposit now or wait?

Term deposit rates are influenced by the RBA cash rate. If rates are expected to fall (which lowers the reinvestment rate at maturity), locking in a longer term can be advantageous. If rates are expected to rise, shorter terms maintain flexibility to reinvest at higher rates. Given the difficulty of predicting rate movements, many depositors use a ladder strategy to hedge between both outcomes.

Can I hold a term deposit inside superannuation?

Yes — both industry and retail super funds offer term deposit options as an investment choice within a super account. SMSF trustees can also open term deposits directly through banks in the SMSF’s name. Interest earned inside super is taxed at a maximum of 15% (in accumulation phase) or 0% (in pension/retirement phase), which makes term deposits more attractive inside super for high-income earners.

Term Deposits vs High-Interest Savings Accounts

Both term deposits and high-interest savings accounts (HISAs) offer low-risk, interest-bearing returns. The key differences:

When to choose a term deposit:

• You have surplus cash you don’t need for a fixed period (6–12 months)
• You want rate certainty (protection against RBA rate cuts)
• You have a specific future date you’re saving toward (e.g., renovation, tax bill)

When to choose a HISA:

• You need the flexibility to access funds
• You want to maintain an emergency fund
• You want to take advantage of rotating introductory bonus rates across banks (rate chasing)

Both products are protected under the Australian Government’s Financial Claims Scheme (FCS) up to $250,000 per account holder per APRA-authorised institution.

Early Withdrawal Penalties

Breaking a term deposit before maturity incurs a penalty — typically a reduction in the interest rate earned for the period held. Common penalty structures:

• Up to 30 days early: 20% of the stated interest rate
• 31–90 days early: 50% of the stated interest rate
• 91+ days early: 80% of the stated interest rate

Check your specific institution’s PDS before committing, as penalty structures vary. For funds you may need to access, a HISA is generally safer.

This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.