Business transaction accounts explained

A business transaction account is the account a business runs through: customer receipts arrive in it, and supplier invoices, wages, super contributions and tax payments leave from it. It is held in the name of the business entity, whether that is a sole trader trading under their own name, a partnership, a company or the trustee of a trust, and opening one generally requires an ABN along with identification for each owner, director or signatory.

A sole trader is legally the same person as their business, so a personal account can technically be used for business. A separate account keeps business income and expenses in one place, which is what makes bookkeeping, BAS preparation and claiming deductions straightforward, and it is the arrangement the ATO describes for keeping business records. A company is a separate legal entity and needs an account in its own name. A trust is not a separate legal entity, so its account is held in the trustee’s name, and the ATO says a business run through a partnership, company or trust must have a separate bank account.

The fee structure is where business accounts differ most from personal ones. Personal transaction accounts with no monthly fee are now the norm, but business accounts still use a mix of models:

• No monthly fee, unlimited electronic transactions. The account costs nothing to hold, and fees apply only to specific events such as cash deposits or paper statements.
• Monthly fee with included transactions. A flat monthly charge covers a set number of transactions, or unlimited electronic ones, with charges above the allowance.
• Low or no monthly fee, pay per transaction. Each deposit, withdrawal or payment carries a small charge, which suits a business with very few transactions.

Across all three, the fees that business account feeds publish most often are event fees and transaction fees: cash deposits at a branch or post office, cheque deposits and dishonours, over-the-counter withdrawals, international transfers, and replacement cards. A business that banks takings in cash pays for it under most accounts, so the cash handling schedule matters more to a retailer than the monthly fee does.

Business transaction account feeds publish a common set of features. The ones that come up include:

• Card access, including additional debit cards for staff, each with its own limits.
• PayID and NPP payments, so customers can pay to an email address, phone number or ABN and the money arrives in seconds.
• Digital banking and digital wallets, with mobile and web banking built for multiple users.
• Bill payment and batch payments, including payroll files and BPAY.
• Notifications and fraud protection, with alerts on incoming payments and large or unusual transactions.
• Overdraft access, where a linked overdraft can be added to the account.
• A relationship manager, typically for businesses above a certain size or borrowing level.

Two features that are harder to read from a feed are often the deciding ones. The first is the accounting software connection: a direct bank feed into the business’s accounting package removes manual reconciliation. The second is user access: whether the account supports several users with different authorities, for example a bookkeeper who can prepare payments and a director who approves them.

Most business transaction accounts pay no interest, or a very low rate on the whole balance. Fewer than half of the business transaction accounts in the CDR feeds publish an interest rate above zero. Businesses that keep a working balance above day-to-day needs usually sweep the surplus into a linked business savings account or a business term deposit, where the rate is meaningfully higher.

Some businesses hold money that belongs to their clients: a solicitor holding settlement funds, a real estate agent holding rent and deposits, a conveyancer holding money before settlement. State and territory legislation requires that money to be kept in a dedicated trust account, separate from the business’s own funds, and subject to audit and record-keeping rules.

Regulated trust accounts are a category of their own in the CDR feeds. The features they publish centre on digital banking, real-time payments, unlimited transactions and bill payment, much like an ordinary business account. The differences are in who can hold one and where the interest goes:

• Approved institutions only. General trust accounts of law practices, and agents’ trust accounts, can be held only with authorised deposit-taking institutions approved for the purpose under the relevant state or territory law.
• Interest to a statutory fund. In several states, interest on solicitors’ trust accounts is paid to a public purpose fund, and interest on real estate agents’ trust accounts to a state fund, rather than to the business or its clients.
• Separate products by profession. Banks often publish separate trust account products for solicitors, real estate agents, conveyancers and other regulated professions, because the rules differ between them and between states.

A trust account held under these rules is a different thing from an account held by the trustee of a family or trading trust, which is an ordinary business account in the trustee’s name.

The cheapest account for one business is often the most expensive for another, because the cost depends on how the business actually transacts.

The figures that separate accounts are the monthly fee, what it includes, the cost of cash and cheque handling, international payment fees, and the features the business uses every day. Because a business account is usually the anchor for its cards, lending and merchant facilities, many businesses keep it with the bank that provides their finance, and a bank’s pricing on the account often reflects the rest of the relationship. Current business transaction and trust accounts are compared on the Business Transaction Accounts page.