Once a foreign business has registered a new entity in Australia, it is time to set up a business bank account for the new endeavour. There is a specific procedure for setting up a business bank account in Australia and by following the steps listed below, you will be able to successfully open your new account.
The first task is to register your business in Australia with the Australian securities and investment Commission (ASIC) and have a current ABN (Australian Business Number) and/or a ACN (Australian Company Number) registration number. You will receive these numbers when you register your business. It is only possible to open a business bank account in Australia, if you have a registered business, through forming an Australian company.
While you can change your business structure down the track it can be more complex to do so. Therefore we recommend putting in thought at the beginning about your business and how you think it will operate moving forward.
Related: Subsidiary or Branch: Choose the right Business Structure when setting up in Australia
Each of the business setups is different and it is worth taking advice on which business structure is best for you, before registering your entity and becoming committed to one structure. If you set up a company, partnership, or trust, you must have a business bank account for tax purposes.
Here are some of the advantages of having a business bank account:
- It allows you to track and control your business expenses and income.
- It allows you to show your business finances are completely separate from your personal finances.
- It will also help you when it comes to preparing information for your accountant to produce BAS statements and tax returns and any other reporting obligations you may have.
Once the business is registered, you will need to decide two things:
- Firstly, what type of bank account you will need and will be most suitable for your company.
There are three types of bank account that the majority of businesses use, is a Business Transaction Account (cheque account), which provides an account for day-to-day transactions. This would be used for online banking tasks such as receiving payments and making payments, withdrawing money and international transfers. These days most of the banks offer free business transaction accounts to clients, but a fee may be charged which could range from $10 - $40 per month. International transfers tend to attract much higher fees, so it is worth thinking about whether you will be doing a lot of moving money around internationally or not. If you will, it may be worth looking for a multi-currency account, that more and more of the banks are offering. These accounts allow you to receive payment in different currencies and leave the money in the currency it was paid in until you want to either spend it, in that currency or convert it into Australian dollars. This allows you greater flexibility when receiving or paying funds in a foreign currency and allows you to wait for exchange rates to change before converting money. Alternatively, if you have banking in two countries or more, there are a number of low-cost money transfer services available now, that are much cheaper than the big banks.
If you are looking to save money and are looking to earn interest on company profits, a longer-term savings or deposit account might be a good option. These accounts usually go hand-in-hand with a checking account and will allow you to move extra money from your checking account into a savings or deposit account. The difference between a business savings account and a business term deposit account is that a savings account is likely to be much more flexible with how you deposit and withdraw funds. There tend to be fewer requirements with a business savings account to leave money for a fixed period. This inevitably results in interest payments being lower, but it does allow flexibility. A business term deposit account will usually offer higher rates of interest which are often fixed for a pre-agreed length of time, so if you want to withdraw money before the term is up, there is often a penalty fee, which could result in wiping out a significant percentage of the interest earnt, especially at a time of very low interest rates. It is worth thinking through how flexible you need your accessible funds to be, as interest rates are currently at all-time lows and inflation is starting to race ahead, which means that saved money is actually becoming worth less over time. This may be only a temporary situation, but it is certainly worth bearing in mind when choosing which type of bank account or accounts to open.
- Secondly, which bank to choose to join.
Once you decide which type or types of bank account you need, you then need to decide which bank to choose. The traditional Australian big four banks offer a wide range of business banking products and often offer incentives for new customers. It is also worth considering some of the lesser-known banks operating in Australia, as they may offer more flexibility in banking and lower fees.
The Australian big four banks are:
- Commonwealth Bank
- National Australian Bank
- ANZ Bank
- Westpac Bank
Choosing one of these banks is an easy choice and they are all very similar in terms of products and service. If you want to look further afield, than it would be worth looking at the following banks as well and see what they have to offer.
- Heritage Bank
- Great Southern Bank
- HSBC Bank
There are many more banks offering business services and accounts in Australia and the choice will inevitably grow as more foreign banking groups expand into the Australian market. To make the decision on which bank to choose, we recommend comparing the banks under the headings below.
Account Fees – There a many fees associated with banking, from withdrawing cash to monthly account charges. You need to decide whether the service offering is worth the fees and whether the bank is offering good value for what you require.
Payment choices – All the banks offer a debit card with their business bank accounts, but it is worth considering if they also offer digital payment methods like Apple Pay, Google Pay, and the others that are rapidly coming to market.
Banking Apps – How good and how relevant is the bank’s app? It is increasingly common for companies to do more and more of their banking online, so the quality and range of services a bank offers on its app, can be extremely important. Many of the banks now offer extremely sophisticated and feature laden apps for business customers and again, it is worth thinking about what level of service you want from your bank’s app.
Transaction limits – If you make a lot of transactions and some of them are for significant amounts, then the daily transfer limit your bank sets will be very important to you and the success of your business. It is worth discussing transaction limits with all potential banks before you make your decision, if it is an important issue for your business.
Overseas costs – Although this has been talked about earlier in this article, it is a crucial issue if your business is involved with overseas markets, or you work with or part of an overseas company. The cost of moving currency can be very high and finding a bank that makes it simple and as cost effective as possible, may be extremely important for your business. The other consideration for a company that does a lot of business overseas is whether you and your team will need to travel and what kind of banking will you require while you are on foreign business trips. Do you need a business account with a local currency debit card for example and the ability to transact in different currencies from the same account.
There are many considerations when deciding which accounts and which bank to choose and it is not a decision that should be made without doing research and even better, talking to an accountancy group like Azure, who can give you the very best advice.
Related: Starting A Business In Australia Checklist – Before, During And After!
Why Azure Group?
As a leading accounting and advisory firm, the Azure Group have built a strong reputation on assisting offshore clients set up and maintain their operations in Australia. We can provide you with a full range of advice and support to ensure that you make the right decisions from the beginning.
Azure Group has significant experience managing the needs of international businesses as a specialist in bringing foreign companies to Australia and helping them be successful in the local market.
Azure Group understand the challenges and complexities of establishing a business in Australia and how important it is for companies to be able to concentrate on doing what they do best, while Azure Group deal with incorporation, compliance, bank account set up and continuity planning.
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