A jointly held term deposit sits quietly in the background when a relationship ends. Unlike a joint transaction account, it doesn't demand immediate attention. But that quiet comes with a trap: the maturity date keeps moving closer, and any decision made without a plan can trigger early-exit penalties or leave one partner unfairly exposed. Rockwell Family Law Services works with separating couples who need to untangle exactly these kinds of fixed assets, and term deposits come up more often than most people expect.
What a jointly held term deposit actually is
A term deposit is a fixed-interest account where you deposit a lump sum for a set period, typically anywhere from one month to five years. Both account holders have their names on the account, and most Australian banks require consent from all account holders to break or withdraw the funds early.
That requirement for joint consent is the central difficulty after separation. If one partner refuses to cooperate, the other can't simply redeem the deposit and walk away. The funds stay locked until maturity or until both parties agree to an early exit.
Your two main options: wait or break early
When you separate, you face a practical fork in the road.
Wait for maturity. If the term deposit is due to mature within a few months, waiting is often the least costly approach. At maturity, both account holders can instruct the bank to distribute the funds rather than roll them over. This avoids any early-exit penalty.
Break the deposit early. If maturity is 12 or 24 months away and you need to resolve your financial position now, you can request an early redemption. Most Australian banks will allow this with the written consent of all account holders. The cost is an interest rate reduction, usually between 0.5% and 2% of the agreed rate for the remaining term. It's a real dollar loss, but it's sometimes worth it to achieve a clean separation.
The right choice depends on your maturity date, the penalty rate your bank applies, and how urgent your broader financial separation needs to be. Get both figures in writing from your bank before deciding.
What to do if your ex won't consent
Refusal to consent is the most common complication. Your ex may refuse to sign off on an early redemption to delay matters, retain leverage, or simply because communication has broken down. You have a few paths forward.
First, check the account terms. Some banks will release funds to one party if the other is formally unreachable or if there is evidence of a relationship breakdown, but this is rare. Most banks won't act unilaterally without court authorisation.
Second, include the term deposit in your formal property settlement negotiations. The deposit is an asset with a fixed, verifiable value. It can be offset against other assets, so one party receives a different asset of equivalent worth while the other retains the deposit until maturity. This approach avoids the penalty entirely.
Third, if negotiations fail, the Family Court of Australia can make orders that bind a third party such as a bank. A consent order or binding financial agreement that specifically addresses the term deposit gives the bank the legal instruction it needs to act. Understanding how property settlement works in Australia is essential before you reach this stage, because the process governs how all assets, including term deposits, are divided.
How the bank handles it in practice
Once both parties agree, the process with most Australian banks is straightforward.
- Request an early redemption form or a maturity instruction form from your bank's branch or online portal.
- Both account holders sign the form, nominating the accounts into which each share of the funds should be deposited.
- The bank calculates any early-exit penalty and deducts it before distributing the balance.
- Each party receives their agreed share into their individual accounts.
If the term deposit is being split as part of a formal consent order, provide the bank with a certified copy of the order. Banks have specific internal teams for court-ordered transactions and the turnaround is usually faster than people expect.
Tax considerations you shouldn't ignore
Interest earned on a jointly held term deposit is assessable income. Before separation, most couples split the interest income 50/50 on their tax returns. After separation, the Australian Taxation Office still expects the interest to be declared in proportion to each person's legal entitlement for the period they each held it.
If the deposit ran across a financial year that straddles your separation date, both of you may need to declare a share of the interest even if you haven't yet agreed on the underlying capital. Keep records of when the account was held jointly and when it was formally separated. Rockwell Family Law Services recommends getting advice from your accountant alongside your family lawyer at this point, since the two issues are connected.
Where term deposits fit in the broader property pool
A term deposit is treated the same way as any other financial asset in an Australian property settlement. It goes into the asset pool at its face value plus accrued interest at the date of separation, or the date of settlement if the parties agree on a different valuation date.
If your property settlement involves no written records of how the deposit was funded or built up over time, that gap can complicate your position. The guidance on handling a property settlement when you have no written records is directly relevant here, particularly if one party contributed significantly more to the deposit and wants that recognised.
Document everything you have: bank statements showing deposits, any correspondence about the account, and the original term deposit certificate. Even partial records strengthen your position considerably.
Practical steps to take now
If you have a jointly held term deposit and you've recently separated, take these steps as soon as possible.
Contact your bank and request a current statement showing the balance, accrued interest, maturity date, and the penalty rate for early redemption. Put the maturity date in your calendar immediately. Roll-overs happen automatically at many banks if neither party acts, and a rolled-over deposit restarts the clock.
Notify your family lawyer of the deposit's existence and value. It must be disclosed in any property settlement process. Failing to disclose it is a serious problem under Australian family law, regardless of whether you think the amount is modest.
If your separation is recent and the maturity date is more than six months away, explore whether the deposit can be treated as a negotiating point in your overall settlement rather than broken early. A dollar left intact is worth more than a dollar reduced by a penalty fee.
Rockwell Family Law Services can help you work through how a term deposit fits into your specific property settlement, including how to handle an uncooperative former partner or a deposit with a complex funding history. The earlier you get advice, the more options you keep open.