We herein enclose extracts from an excellent article from Finder re Government Guarantees for bank accounts and our planning thoughts to maximise the protection of the government guarantee thereon.

Banks included in the Australian Government Guarantee Scheme

The Australian Government guarantees deposits up to $250,000 in Authorised Deposit-taking Institutions (ADIs) such as banks, building societies or credit unions. This means that if something happens to the bank, this money is guaranteed by the government to be paid back to you. Your deposit up to $250,000 is safe with all Australian ADIs, including online banks like UBank, ING and ME Bank, as well as smaller credit unions. All ADIs are regulated in the same way as the Big Four banks.

How does the Australian Government Guarantee work?
The Australian bank Government Guarantee protects your deposit up to the value of $250,000. This cap applies per person and per Authorised Deposit-taking Institution (ADI). If you have separate bank accounts with different banks with less than $250,000 in each of them, you will be covered for both accounts. If you have more than $250,000 in a single bank account (or term deposit, or savings account), you won’t be covered for the amount over $250,000.
It’s important to understand that the government guarantee covers the underlying ADI, and not different brands. Some ADIs offer multiple accounts under different brand names (such as Westpac, Bank SA and St George). If you have multiple accounts under different brand names but all under one ADI, the guarantee only applies to the one ADI and not the different brands. For example, UBank is protected under the Government Guarantee Scheme, but UBank is owned by NAB. This means that if you have $250,000 in an account with UBank, and $250,000 in an account with NAB, you’ll only have $250,000 guaranteed as both banks operate under the same ADI licence.
You might need to double check with your ADI to make sure that you don’t fall into this trap. For joint accounts, each person is entitled to an individual guarantee. For example, for a joint account holding two people, the account is covered up to $500,000.

Take Out and Action Plan
If possible, if you have cash in various entities i.e. say trust, individual and superfund.
To maximise your government protection -
For individual accounts
Put accounts in joint names - or split cash in individual names each getting $250,000 guarantee.
Split cash amongst different guaranteed institutions i.e. the Big Four banks.
Individual has - $1,000,000 cash
Trust has - $1,000,000 cash
Superfund - $1,000,000 cash

In order to protect the cash suggested as follows: -
Individual – 4 different institutions i.e.$250k each split amongst the Big Four banks that are not subsidiaries of each other i.e. Westpac and St George are one institution only
Trust – Split $250k into 4 different banks
Superfund- Split $250k into 4 different banks
By this simple planning you will at least get the impact of having comfort in parts of your cash/term deposits are guaranteed.

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.

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