(13 May 2010 – Australia) Kevin Rudd has claimed that a new policy where savers receive a 50 percent discount for the first A$1000 they earn in interest on their deposits, held in banks and various other interest earning methods, will create flow-on effects for the financial system.Australia’s Prime Minister, Kevin Rudd, said that the government recognises that bank deposits are the preferred savings method for many Australian’s.
In his budget speech Mr Rudd noted that there was currently a considerable variation in the taxation treatment of alternative savings vehicles.
The current taxation treatment sees interest taxed at the saver’s marginal rate without any discount and any capital gains on assets held for longer than a year receives a 50 percent discount.
The government said that it acknowledged that the current method disadvantaged lower-wealth and older savers who are likely to hold their non-superannuation savings in interest bearing products.
To rectify this the government has announced that from July 1st 2011, Australian’s will obtain a 50 percent tax discount for the first A$1,000 of interest they earn, including interest earned on deposits held in banks, building societies and credit unions, and on bonds, debentures and annuity products.
Mr Rudd said that the government expects the change to make interest-bearing products more attractive to savers, which will have positive flow on effects for competition for the financial system.