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  • Setting up your business banking

    If you're operating as a partnership, company or a trust, you must have a separate bank account for tax purposes.

    If you are operating as a sole trader, you don't have to open a business bank account, but it's a great idea to do so.

    Separate business and personal expenses

    It's important to keep business and personal expenses separate. One way to do this is to have separate bank accounts for your business.

    If you are a sole trader and choose to use one account for both business and private purposes, you must clearly identify any personal payments or expenses including:

    • any cash taken from money your business receives (often referred to as 'drawings')
    • records of how you worked out the portion of expenses that are private when expenses relate to both business and personal use (for example, if you have a home-based business).

    You can only claim amounts related to business use and these must be clearly documented.

    Note: Keeping your private and business transactions recorded separately can save you time and money when it comes to preparing financial documents, activity statements and tax returns.

    Benefits of a business bank account

    A separate business bank account will help you to:

    • clearly and easily show your business finances separate from your personal finances
    • analyse your cash flow
    • monitor your business income and expenses
    • extract information needed to meet your tax and reporting obligations
    • easily get detailed records of your business transactions, particularly if you put those transactions through a limited number of accounts.

    If you have a business credit card attached to your business bank account, and do most of your transactions through your credit card, your bank statements will, in effect, be a checklist of your expenses.

    Choosing a business bank account

    When you set up your business bank account, consider how the information in your deposit books and statements will help you report on your income tax and GST. Most financial institutions offer bank account packages suitable for small business.

    Requirements for opening business accounts can vary, so check details by visiting the financial institutions or their websites. If you have a financial adviser or use a tax professional, you may also seek their advice to determine the accounts, products and services you need to run your business.

    When you choose your account, consider:

    • the type of business you run, including services you need and cash flow
    • any transaction fees and account service fees
    • whether purchases and sales are domestic or international
    • interest, including interest rates on deposits and interest-free periods on credit cards
    • fees and charges on business cards
    • merchant facilities, such as EFTPOS.

    Access to internet banking should also be considered as you can do most payment transactions with us. Transacting with us electronically makes it easier to ensure your payments reach us on time, and refunds arrive quickly.

    You should keep your bank records for five years, including one-off financial records, such as loan documents or lease agreements and contracts.

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    Last modified: 28 Nov 2019QC 42996