RBA Raises Cash Rate to 4.10% in March 2026: Tax Implications for Every Taxpayer
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Primary tax-year context: Current Australian tax settings
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General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.
The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.10% on 17 March 2026 — the second consecutive hike after the February increase to 3.85%. The cumulative increase of 50 basis points since the start of the year marks a clear reversal of the easing cycle that began in mid-2025.
The Board cited persistent underlying inflation at 3.9%, stronger-than-expected employment growth, and continued housing price rises as the key factors behind its decision.
What drove the decision
The RBA’s updated forecasts paint a more stubborn inflation picture:
- Trimmed mean CPI is now expected at 3.9% through June 2026, up from the 3.7% forecast in February
- Unemployment remains at 4.0%, below the level the RBA considers consistent with stable inflation
- GDP growth is tracking at 2.5% — above the economy’s estimated potential
- Housing credit growth accelerated to 6.2% annualised in the March quarter
Governor Bullock noted that “the Board will not hesitate to act further if inflation expectations become unanchored,” while leaving the door open to a pause at the May meeting depending on Q1 CPI data.
Higher mortgage repayments — who can deduct, who can’t
For a $600,000 variable-rate mortgage, the cumulative 50 basis point increase since January 2026 adds roughly $190 per month to repayments.
| Loan balance | Monthly increase (0.50% cumulative) | Annual impact |
|---|---|---|
| $400,000 | ~$127 | ~$1,524 |
| $600,000 | ~$190 | ~$2,280 |
| $800,000 | ~$254 | ~$3,048 |
| $1,000,000 | ~$317 | ~$3,804 |
The tax treatment depends entirely on the purpose of the loan:
- Owner-occupier mortgage: Interest is not deductible. The full increase is out-of-pocket
- Investment property mortgage: Interest is deductible at your marginal rate. A $600,000 investment loan at 37% marginal rate generates roughly $845 more in deductions per year from this hike cycle
- Mixed-purpose loans: Only the investment portion is deductible — proper apportionment and records are essential
Savings and term deposit tax hit grows
Banks are passing through rate increases to savings products. High-yield savings accounts are now offering 4.5–5.0% at major banks.
All interest income is taxable at your marginal rate with no discount or offset. At higher rates, the tax bite is material:
| Savings balance | Annual interest at 4.75% | Tax at 37% | Tax at 45% | After-tax return |
|---|---|---|---|---|
| $50,000 | $2,375 | $879 | $1,069 | $1,496 / $1,306 |
| $100,000 | $4,750 | $1,758 | $2,138 | $2,993 / $2,613 |
| $200,000 | $9,500 | $3,515 | $4,275 | $5,985 / $5,225 |
The ATO receives interest data directly from all Australian financial institutions. Undisclosed interest income is one of the most common data-matching adjustments. Ensure every account is included in your return.
Impact on CGT timing
Higher rates change the calculus for selling assets:
Holding costs are up. If you’re holding a leveraged investment, the cost of carrying that debt just increased by $190/month per $600K borrowed. For assets with modest capital growth, this tips the equation toward earlier disposal.
Discount rate is higher. A $100,000 capital gain in 12 months is worth less in today’s dollars at 4.10% than it was at 3.35%. The opportunity cost of waiting has increased for any investor comparing a deferred sale against risk-free returns.
But tax-loss harvesting has a floor. If you’re sitting on unrealised losses, selling to crystallise them is only valuable if you have gains to offset. Higher rates don’t change this arithmetic — they just change the urgency.
Use the CGT calculator to compare after-tax outcomes for selling now versus holding.
Division 7A benchmark interest rate
Private company loans under Division 7A use a benchmark rate set by the ATO, linked to the RBA cash rate. The current 2025-26 benchmark rate is 8.27%. If the cash rate remains elevated, the 2026-27 benchmark rate will be higher, increasing the minimum yearly repayment required on Division 7A loans.
Business owners with existing Division 7A loans should model the impact. See Division 7A benchmark rate 2025-26 for current details.
What to watch next
| Date | Event |
|---|---|
| 17 Mar 2026 | Cash rate increased to 4.10% |
| 30 Apr 2026 | Q1 2026 CPI release — key data point for the RBA |
| 20 May 2026 | Next RBA Board meeting |
| May 2026 | Federal Budget — potential fiscal response |
| Jul 2026 | ATO updates GIC/SIC rates for Q3 2026 |
Market pricing currently implies a 60% probability of a pause in May, conditional on the Q1 CPI showing a deceleration. If trimmed mean inflation remains above 3.5%, a third hike to 4.35% cannot be ruled out.
Key takeaways
- The RBA raised the cash rate to 4.10% on 17 March 2026 — 50 basis points higher than the start of the year
- Investment property mortgage interest remains fully deductible — higher rates mean larger deductions but worse cash flow
- Owner-occupier mortgage interest is not deductible — this is a pure cost increase
- Savings interest is fully taxable at your marginal rate, with no discount
- Higher holding costs may bring forward CGT timing decisions for leveraged investors
- Division 7A benchmark rates will likely increase for 2026-27
Model your position under higher rates
Use the Income Tax Calculator to see your marginal rate, or the Investment Property Calculator to model after-tax rental returns at 4.10%.