Setting up a business bank account is a fundamental step when starting your own business, enabling you to operate legally, track performance, manage cash flow, and keep the tax office off your back.
Like all financial products, there are differences between the business bank accounts available on the market. As a savvy business owner, you should always shop around and compare to find the best business bank account for your needs.
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A business bank account can include transactional and high interest savings accounts that are specifically designed to help you manage business-related income and expenses. Separate bank accounts for your business funds is not only a legal requirement for many businesses, it helps you run a tight ship.
“All businesses should have separate accounts—this will allow them to put money aside for important things such as tax, rainy days and employee obligations,” according to chartered accountant and partner at Carbon Group, Michelle Maynard.
“Only having one account runs the risk of not saving for those future liabilities—meaning (you may) get into trouble.”
According to the Australian Tax Office, if your business is structured as a company, trust or partnership, you must have a separate bank account. You’re also required to keep banking records for five years, which is why online banking that simplifies record-keeping is a popular choice for Australian businesses.
For company owners and directors especially, a business bank account is critical for staying compliant. Companies are separate legal entities—meaning you can’t use money earned by the company for personal purposes. So, you can pay yourself a wage, but you can’t withdraw money at will to pay for your groceries.
Sole traders—which includes those who are self-employed, freelancers and independent contractors—can technically get away with using a personal bank account. But Maynard recommends that sole operators also create a clear distinction between business and personal funds.
“Have a dedicated business bank account where your customers pay you, and you pay your suppliers. This will make it easier to track,” Maynard adds.
“If you want to take funds from the business, transfer them to your personal everyday account.”
She said sole traders should also have at least one separate savings account to hold money to cover future tax bills.
There are two main types of business bank account offered by lenders:
For company owners and directors especially, a business bank account is critical for staying compliant. Companies are separate legal entities—meaning you can’t use money earned by the company for personal purposes. So, you can pay yourself a wage, but you can’t withdraw money at will to pay for your groceries
Michelle Maynard says businesses are wise to open both an everyday transaction account and a savings account. You might even prioritise a bank that enables you to create multiple business savings accounts so you can separate savings by their purpose: e.g., BAS/GST/PAYG withholding, and income tax.
Here’s how Maynard suggests you leverage your multiple business accounts:
“By doing these things regularly, you will ensure you are building the right buffers so you don’t get unexpected bills when lodgements are due,” she says.
“If there is sufficient cash flow, also consider putting some aside for a rainy day—whether that be an unexpected bill or expense, wanting to purchase a large piece of equipment, or future business plans.”
You might find it easier to open a business account with the institution where you do your personal banking—due to streamlined application processes and transferring between accounts. But Maynard cautions you should focus on setting up your business accounts in the most efficient manner, as opposed to the most convenient, to avoid the considerable hassle of changing accounts later on.
“So, investigate and think about how you will need the accounts now, and in the future. Will you need to add an eftpos or online payment option? Can your bank and the chosen account you have work with that?” she says.
“While it might take some more legwork to set up with a different provider—the convenience you save in the beginning might be far outweighed by issues in the future if you don’t get it right.”
Maynard says that while cheques are pretty much non-existent and cash handling is dwindling in Australia—some businesses do still need to accommodate payments in cash and cheques.
“So, think about that when making your bank choice—is there a branch or deposit ATM nearby that you can access?” she says.
“Again, you don’t want to waste energy and time driving around to find a branch, so factor how you are going to use the account when deciding what account and bank to use.”
Maynard said finding a good rate on your business savings account was important, but having to meet certain conditions can be a downside.
“For some that offer higher savings there is a minimum deposit and limited withdrawal condition placed on it. Don’t be blinded by the interest rate offer—make sure it will actually work with how you need and want to use the account,” she says.
There are a few accounts that combine everyday transactions and the ability to earn interest (we’ve included a few in our list below), but having a separate savings account can help you be more organised and be psychologically important to avoid spending.
“For your savings accounts, try to have them with another institution than what you have your transaction accounts with—this will mean it will be harder to access those funds, and you can’t do a quick transfer. Hopefully that stops you dipping into the savings unless you really need it,” Maynard says.
However, she says a better approach for sole traders could be to allocate savings into an offset account linked to your mortgage.
“The interest you save on the mortgage will normally be more than what is paid on savings accounts—plus you don’t pay tax on it,” she adds.
We’ve highlighted some of the best business transaction and savings accounts below.
Note: The below list represents a selection of our top category picks, as chosen by Forbes Advisor Australia’s editors and journalists. The information provided is purely factual and is not intended to imply any recommendation, opinion, or advice about a financial product. Not every product or provider in the marketplace has been reviewed, and the list below is not intended to be exhaustive nor replace your own research or independent financial advice. For more information on how Forbes Advisor ranks and reviews products, including how we identified our top category picks, read the methodology selection below.
To open a business bank account you’ll need to prove your identity and your connection to the business in question. You may be asked to provide:
You may also be asked to provide proof such as a copy of your partnership agreement, the certificate of registration of your business name, or your ASIC certificate of registration. Depending on the services offered by your chosen bank, you may be able to complete your application online (most common), over the phone/email, and via a branch.
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1
Wise Business Account
Sign up for the business account with no hidden charges, high rates or monthly fees
Pay employees, get paid and manage cash flow overseas – all in one place
Move money between currencies in seconds, always with the real exchange rate and without high conversion fees
The best bank for business banking depends on the needs of your business and how you want to organise and manage your finances. For instance, some accounts offer better value if you only bank online, yet some businesses may have considerable cash handling requirements.
One disadvantage of savings accounts aimed at businesses can be that, in order to receive the highest rate, you need to meet conditions like a minimum deposit amount, or there may be limits on withdrawals. “Don’t be blinded by the interest rate offer – make sure it will actually work with how you need/want to use the account,” Michelle Maynard from Carbon Group said.
Your business bank accounts exist to help you keep track of business income and expenses. Day-to-day, it doesn’t make sense to transfer personal funds into a business account—and it’s less messy at tax time if you avoid cross-contamination. However, when you’re first starting your business, or setting up your account, the funds to operate your business may come from your personal cash reserves. It’s wise to speak to your accountant or business adviser about the smartest, tax-effective way to fund your business with personal money.
