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What is a business savings account?
A business savings account is an account that allows you to earn interest on your business funds while you're not using them. It's like a regular high interest savings account, except it's for business use rather than personal use. A business savings account will sometimes often have a minimum balance requirement that needs to be met in order to earn interest, and this balance requirement is usually higher than those on personal savings accounts.
How to access your money in a business savings account
By linking the business savings account to a business bank account, you can easily transfer money back and forth when you need to. It can be a good idea, if possible, to link our business savings account to a business bank account with the same bank so you can see both accounts side-by-side in your mobile banking app or Internet banking portal.
How business savings account interest rates work
Like regular savings accounts, business savings accounts offer variable interest rates meaning they can change at any time. They're not fixed like they are with a term deposit or fixed-rate home loan. A lot of business savings accounts offer tiered interest rates, meaning the higher your balance the more interest you can earn. There might also be other conditions to meet to earn more interest, such as meeting the minimum balance requirement or making regular deposits.
Who can open a business savings account?
A business savings account is not for personal use. You can only open a business savings account if you're operating as a sole trader, partnership or trust in Australia. This is to ensure that all businesses are keeping their business finances separate from their personal finances. If you're a sole trader you're not legally required to use a dedicated business account, however you might find it easier to do so.
You will need to prove you're a business by providing your Australian Business Number (ABN) and/ or Australian Company Number (ACN), plus supply your registered business address when opening the account.
Business savings accounts have many benefits
Business savings accounts are specially designed with a range of features to help your business better manage its finances. These accounts can;
- Allow you to earn a high rate of interest on business funds, much higher than you would receive in a business transaction account
- Offer a bonus interest rate for a special introductory period
- Offer low or no transaction fees
- Allow easy access to your funds if required
- Offer the security and confidence of knowing that your money is protected by the Australian Government Guarantee
- Be tailored to suit short or long-term business goals
The pros and cons of business savings accounts
A business savings account could be a smart choice if you have extra money at the end of each month that you don't need to pay invoices or other expenses. Consider the pros and cons below:
- Passive income. A savings account is a good way to keep your money at work when it’s not needed for other business purposes.
- Withdraw funds without penalty. Unlike term deposits, a business savings account allows you to withdraw funds when you need to without penalty and without having to give any notice.
- Security for your funds up to $250,000. Due to the Australian Government Guarantee on deposits totalling up to $250,000, a business savings account is a secure way to store your business funds.
- Fees may vary. Some banks may charge fees after a certain number of transactions or withdrawals.
- A high minimum account balance may be required. Some banks will require you to maintain an ongoing account balance of at least $10,000, which may be difficult if you're a new business.
- No debit card. A business savings account doesn't have access to your money via a debit card, so you'll still need to link it to a business bank account to spend your money.
Here's how to choose the best business savings account
The best business savings account for you will be one that meets the financial needs and goals of your business. Therefore, the best business savings account for your business might be different for another business. For example, will you need to be able to access your funds regularly or will you be happy to lock them away for a large period of time without making a withdrawal? Do you need a business savings account that can be linked to your existing transaction account with another bank, or are you happy to link it to the transaction account with the same financial institution?
The answers to these questions will help you determine which is the best business savings account for you. Once you know what features are important you can start shopping around and comparing business savings accounts. Consider the tips below when comparing accounts.
How to compare business savings accounts
When comparing business savings accounts, make sure to consider the following:
- Check the fees. Look for a business savings account that doesn't charge any monthly account keeping fees.
- Transaction limits. If you often need to withdraw money from your business savings account, look for one that allows several (or even unlimited) withdrawals. Some savings accounts will apply a monthly withdrawal limit of just one or two transactions.
- The interest rate. The main benefit of a business savings account is the ability to earn interest on your funds. Interest rates vary from bank to bank, with some even offering a higher introductory rate for a few months after opening the account.
- Access to funds. Make sure you can easily access your account using Internet banking and via a mobile baking app when you're on the go.
- Minimum balance requirements. With some business savings accounts, the minimum balance requirement can be in the tens of thousands of dollars, while with others there is no minimum balance requirement at all. Consider how much your business can afford to have locked into savings when comparing the different accounts.
How to open a business savings account
Ready to open a business savings account? Follow these steps to open an account today.
- Compare accounts. Use our table above to compare business savings accounts.
- Complete the online application. You’ll need to provide your personal details as well as your business ABN, ACN and tax file number. Your business must be registered in Australia, with a registered address.
- Verify your identity. You, and anyone else who will have access to the account, will need to verify your identity using your driver’s licence, passport or Medicare details.
- Account opened. When the bank has verified your business, your new business savings account will be open and ready for use. You can now access the account via Internet banking or with the mobile banking app to transfer money into it from your business transaction account.
- Common questions asked about business savings accounts -
How am I taxed on my business savings account?
Just as an individual needs to pay tax on any interest they earn from a personal savings account, your business will need to pay income tax on interest it earns in a business savings account. Make sure to keep track of any interest you earn each year and declare it to the ATO.
What is the difference between an ABN and ACN?
An Australian Business Number (ABN) is issued by the Australian Taxation Office (ATO) to all businesses, from sole traders right through to large corporations. It is an 11-digit number and must be displayed on any invoices the business issues. An Australian Company Number (ACN) is issued by the Australian Securities and Investments Commission (ASIC) to every new company in Australia. This nine-digit number ensures that companies can be identified when transacting business. The ACN identifies your business while the ABN allows your business to carry out transactions.
Can I apply for a business savings account with a bad credit score?
Yes, you can. The money in a business bank account is not credit or a loan, it's your money. You can only access money that you put into the account.
Can a business savings account be used for personal savings?
No, these accounts are designed specifically for businesses.
I have multiple employees who will need to access my business savings, is this possible?
Yes, some business savings accounts are structured to allow access to a certain number of employees. Understand however that you are still responsible for the account.
Is my business savings safe?
Yes, deposits in a business savings account of up to $250,000 are secured by the Australian Government in the same way that a personal savings account is.
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