The Australian Government guarantees deposits up to $250,000 in Authorised Deposit-Taking Institutions (ADIs) such as banks (including online and digital banks), building societies or credit unions. This means that if something happens to the bank or the bank goes bankrupt, this money is guaranteed by the government and financial regulator APRA to be paid back to you. This is one reason why deposit products like bank accounts and savings accounts are one of the safest places to keep your cash.
There are a few things you need to know about this scheme, which we'll go through in this guide.
The Australian bank Government Guarantee protects your deposit up to the value of $250,000. This cap applies per person and per Authorised Deposit-taking Institution (ADI). If you have separate bank accounts with different banks with $250,000 or less in each of them, you will be covered for both accounts. If you have more than $250,000 in a single bank account (or term deposit, or savings account), you won't be covered for the amount over $250,000 (this doesn't mean you'll automatically lose your deposit over this amount, though).
The government guarantee covers most deposit accounts, including:
| Response | |
|---|---|
| Competitive interest rate | 66.82% |
| Low or no fees | 10% |
| The term duration | 6.82% |
| Australian Government Bank Deposit Guarantee | 6.36% |
| Online access | 5% |
| Auto renewal option | 3.18% |
| Other | 1.82% |
It's very unlikely that an Australian bank will go bankrupt. Banks in Australia are highly regulated, and need to go through very strict application processes with the industry regulators to ensure they've got enough capital to manage a potential fall in the economy.
If a large majority of a banks mortgage, credit card and personal loan customers were suddenly unable to meet their interest repayments, the bank would use the capital from deposits to get them by for a while as a safety net. However, if all the deposit customers also suddenly want to withdraw their money, this is when the bank would find itself in trouble. This is one reason why the government promises to guarantee deposits up to $250,000 per customer: so deposit holders don't feel the need to run to the bank and withdraw their money all at once.
Remember, this is very unlikely to happen and is a 'worse-case' scenario. But it's good to know that if it were to happen, your deposit would be safe.
The scheme is applied per person per ADI. If you have several accounts with different ADIs, for example if you had one account with Westpac and another with CommBank each with $250,000, both would be covered in the scheme. But if you had two separate accounts with Westpac each with $250,000, you'd only be covered for the first $250,000.
It's important to understand that the government guarantee covers the underlying ADI, and not different brands. Some ADIs offer multiple accounts under different brand names. For example Bank SA, St.George and Bank or Melbourne are all part of Westpac and covered under the one ADI. If you have multiple accounts under different brand names but all under one ADI, the guarantee only applies to the one ADI and not the different brands.
Another example is ubank. Ubank is protected under the Government Guarantee Scheme, but ubank is owned by NAB. This means that if you have $250,000 in an account with ubank, and $250,000 in an account with NAB, you'll only have $250,000 guaranteed as both banks operate under the same ADI licence.
For joint accounts, each person is entitled to an individual guarantee. For example, for a joint account holding two people, the account is covered up to $500,000.
Yes, its does. The residency status of the account holder is irrelevant. If you're eligible and able to open an account and deposit money with a licensed ADI in Australia, then your deposit up to $250,000 is protected by the scheme.
Yes, money held in an Australian ADI by an SMSF or trust is included in the scheme. The SMSF is considered to be one account holder, regardless of how many individual members or trustees are listed on the account. This means that if your SMSF has four members and there's a total of $500,000 in the bank account, it's treated as one account holder and only $250,000 is protected under the scheme.
Because an SMSF is considered to be its own account holder, if you have a personal account in your name and also an SMSF cash account with the same ADI, both would be protected (up to $250,000 each).
Your mortgage is a loan from the bank, so it's not covered in the government guarantee. If in the unlikely event that your bank did fail, deposit holders would be covered by the government and mortgages will likely be transferred to a partner bank or lender.
Rest assured, Digital banks need to go through a strict regulatory approval process to be granted an ADI license. If they're granted a full ADI license then yes they are included in the Government Guarantee Scheme and your deposit up to $250,000 is protected.
Some of these banks haven't got their own ADI license but instead are using the ADI license of an existing bank. Up Bank is using the license from Adelaide and Bendigo Bank, therefore your deposit up to $250,000 with Up Bank is protected under the scheme as well. This is the same case for 86 400, which is now owned by NAB and using NAB's ADI license.
NOTE: Xinja has officially closed its bank accounts and handed its banking license back. Because it was included in the government guarantee scheme, if you were a Xinja customer your deposit up to $250,000 will be protected.
If you're still a bit concerned about your money being used to help bail out a bank in trouble, you have little reason to be. The 'bail out' legislation says that the government can use other financial products, like debt products and securities (shares), to help bail out a struggling bank. However, for the purpose of this legislation a deposit product (like a bank account) isn't considered to be a financial product.
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Thank you for this very useful page.
For an SMSF – just wondering if you can have multiple $250,000 accounts with each in a different ADI and be protected for each account like you can for non SMSF accounts in multiple different ADI’s?
Thanks
Ian
Hi Ian,
Thanks for contacting Finder.
If your SMSF has multiple $250,000 with different ADIs, then it will be covered under the Financial Claims Scheme.
Thanks
Raj
What happens if you have several accounts, e.g. an offset and another savings account with one ADI and the money is less than or equal to $250k, but split across these accounts? Is all the money covered by the Govt. scheme, or just one account with this ADI?
It’s $250K per ADI, per account holder. So if you had an offset account and a savings account with one ADI, you’d be covered for everything in those accounts combined, up to the $250,000 limit.
Hi there,
I understand that Westpac and Bank of Mellbourne are part of the same group so what would happen if i had $250K in each bank ? would the whole $500K be “protected” or just $250K ?
Please let me know.
Cheers and thanks a lot.
Claudio
Hi Claudio,
Only your first deposit of $250,000 would be covered. As stated in this article, the scheme is per person, per ADI.
Thanks,
Alison
hello!
How does the Government Guarantee work in the situation where you have:
1. 250k in your individual name; plus
2. 250k each in two separate company names (where you are the sole director and shareholder); plus
3. 3x joint bank accounts with your minor children adding to 250k; plus
4. 250k as available funds on a home loan in your personal name?
Do they regard each individual and corporate entity as a separate entity each with their own 250k Guarantee?
thank you!
Hi Betty,
The government’s Financial Claims Scheme protects depositors up to $250,000 per account holder should your bank, building society or credit union default. If you have a joint account, each account holder is entitled to the $250k guarantee.
However, it only applies to one account at a particular institution. If you have multiple accounts in your name (eg one savings account and one mortgage offset account), it applies to a maximum of $250,000 at that institution.
Also according to APRA, it only applies to the following account-holders:
– an individual
– a body corporate (including companies)
– a body politic
– a partnership
– any other unincorporated association or body of persons
– the trustee(s) of a trust, a superannuation fund (including a self-managed superannuation fund) or an approved deposit fund.
Note that company names were not listed.
Therefore, overall, if you have more than $250,000 you may want to consider spreading it around different banks and institutions.
Hope this helps!
hello, I would like to know if there is a Community bank which is totally independent and is not owned by big banks or any central bank?
Hi Marina,
Thanks for contacting Finder.
You could consider looking into Community First Bank. They are a member-owned bank.
Thanks
Raj