There are various different types of business structures available in Australia. However, regardless of which you select, it is advised you have a separate business bank account from your personal account. Separating your personal and corporate funds has many advantages, including clearer business finance tracking and simpler banking. In this article, we’ll take a look at some of the advantages of opening a business account and how it can help you.
The Advantages of Having a Business Bank Account
- It will be easier to track your business transactions
It will be challenging to assess how your business is operating and where all of the income is spent if your workplace and grocery expenses are listed on the same bank account.
Owners of a sole proprietorship may choose to manage their company using a personal bank account. However, when they do this, the only way they can gauge how their business is doing is by sorting through all the transactions on their account. They struggle to comprehend whether they or their company is using the funds in the account, which leads to a lot of uncertainty.
The accounting process takes longer when you run your business through a personal account.
A separate business bank account comes in handy in this situation. It will simply keep track of the revenue and expenditures—such as marketing costs, small business insurance, rawmaterials, etc.—for your company, including earnings and losses.
You can use these figures to decide how best to invest your money and cut expenses. Additionally, your accounting processes will be a lot simpler.
- It will be helpful when taxes are due
You must pay taxes as a business owner at a particular time of the year. Taxes that Australian business owners must pay include income tax, GST, PAYG instalments, FBT, and others.
It’s advisable to have a minimum of two company bank accounts if you wish to avoid any tax audits:
- A business transaction account that you can use to attach your credit or debit card and pay for purchases
- A business savings account in which you can have enough money on hand to cover all of your tax obligations, including income tax, GST, and other fees
After you’ve created these two accounts, you might want to use electronic transactions. Compared to transactions involving cash, electronic transactions provide more convenience and accuracy. Digital transactions also help you keep your important receipts safe. You can check and locate the transaction even if you forgot about making a payment.
- Accountancy Will Be Simpler
You can deduct certain business expenses from your taxes if you operate a business. It will be easier for you to avoid missing out on tax deductions and mistakenly declaring personal expenses if you have a separate bank account for your business. You can swiftly review the business bank account statements if the Australian Taxation Office (ATO) requires any information or want to conduct an audit.
However, if you conduct business through your personal account, it will be difficult for you to find the precise data the ATO requires.
The more organized you are, the more money you’ll save on accounting expenses, and the more time your accountant will have to complete the more important responsibilities for your company.
- Faster and easier banking
With time, as your company expands, you’ll have more obligations to fulfil, and it will be preferable to have a quicker and simpler banking transaction system.
Signing up for online banking will make it simpler for you to move some money from one savings account to another. Additionally, your billing will be easier.
- You can pay attention to other crucial business aspects
You can save time in a number of ways when you maintain a separate bank account for your business.
Your account books will be organized considerably more ease to understand. As a result, you won’t have to spend much time sorting through transactions to identify those that relate to the company and personal spending.
Additionally, you can save some time by using a cloud-based accounting tool. Many of theaccounting software applications that are currently available on the market connect to a bank account, automating the process of bookkeeping.
What Are the Steps in Australia for Opening a Separate Business Bank Account?
First, register your company in Australia.
Registering your firm is essential before obtaining a business account. The Australian government accepts four types of business: sole trader, partnership, company, and trust.
Second, select the type of account you want for your business. You can choose from a business term deposit, business transaction account, or a business savings account.
Next, you should select a bank for your business savings. Australia’s four central banks are Bank of Scotland, Nationwide Bank of Australia, Banks Westpac and ANZ.