Banking System in Australia
OverviewBanking is a crucial part of our life especially when it comes to migrating to another country. Foreigners arriving in Australia find it of paramount importance to settle their financial activity and protect their earnings. Opening a bank account in Australia will help you to easily manage your finances and make regular payments such as your rent or tuition fees or just everyday expenses. If you arrived for employment, a bank account is needed for getting paid by your employer. Stick to our banking guide in order to get all necessary information about dealing with banks in Australia.
The country has a developed and competitive banking system that consists of local banks, foreign banks’ branches and locally incorporated subsidiaries of overseas banks. Banking in Australia stated back in 1817 from establishing the New South Wales Bank in Sydney. Within two centuries, its activity spread all across Australia and Oceania. Today’s ANZ Bank was founded back in 1835 in London under the name of the Bank of Australasia. New banks popping up in the country and merger of the most successful resulted in 4 giant banks Australia takes proud in today:
- Commonwealth Bank of Australia (ranked #1 in Riskless Return Ranking by Bloomberg in 2013);
- Westpac Banking Corporation – ranked #4 by Bloomberg and #1 as the most sustainable bank by the World Economic Forum;
- Australia and New Zealand Banking Group (ANZ) – ranked #7 by Bloomberg;
- National Australia Bank (NAB).
Actually, the Commonwealth Government stands on maintaining these four “pillars” and resists any mergers between these banks; although this policy doesn’t seem reasonable from the economic point of view.
Except these leaders, there are lots of small retail banks (such as Bank of Queensland, St George Bank, Adelaide Bank, Bank of Melbourne, and others). Except classic retail banks, Australia is home to over 10 customer-owned banking institutions whose 4.6 million customers are their mutual shareholders. According to their total assets, the richest among them are CUA, Heritage Bank, Newcastle Permanent, and People’s Choice Credit Union.
Foreign banks operate in Australia under the Banking Act in a form of either a branch of the wholesale bank or as a subsidiary incorporated in AU. Acquisition of a banking authority from the APRA is mandatory for conducting a full-scale banking activity. Banks that don’t acquire such banking authority can operate only as representative offices for which a profitable activity is prohibited. Although there are lots of subsidiaries of foreign banks in Australia, only a few of them have a developed presence and a dense net of branches across the country.
How to Choose the Right Bank?
There are lots of criteria you should consider when choosing a bank for opening an account in it:
- What is the bank’s branch network in Australia? (It is wise to prefer a bank whose ATMs and bank offices are spread all across your city and easily accessible.)
- What is the fee for the account setup?
- Is there any monthly maintenance fee?
- Does your bank provide you with the personal banker who speaks your native language?
- Is there any minimum deposit for opening the account?
- Is there any minimum balance you cannot withdraw?
- Is it possible to open the savings account online before moving to Australia? And is it possible to transfer funds to it from abroad using your local bank or any other transfer service?
- Does a bank provide you with the debit plastic card?
- Is the credit card available?
The country’s national currency is the Australian dollar which currently costs approximately 0.68 USD. Inside the country, it is usually abbreviated as $, but you should bear in mind that it is not the USD, but the AUD. The abbreviation of A$ is used much seldom (basically, when it is crucial to distinct between US and AU dollars. The Australian dollar is a stable currency (thanks to the strong national economy and calm political environment); that is why this currency is the 5th most traded in the world.
The Reserve Bank of Australia emits bank notes worth 5, 10, 20, 50, and 100 Australian dollars, goldish coins worth 1 and 2 dollars and silvery coins for 5, 10, 20, and 50 cents. As there are no coins for 1 or 2 cents, all prices are always rounded to 5 cents.
How to Open Bank Account in Australia?
Migrating to another country is a serious step that requires making lots of well-informed and timely decisions. Opening a bank account is one of them. We recommend you to do this procedure before your arrival in order to have access to your funds immediately after landing in Australia (for example, you will need money ASAP for renting an apartment).
Most of the Australian banks offer a service of opening a bank account through their website, and you can do it as early as 12 months before shifting to Australia: you fill up the relevant application form, add the required passport information, and then the bank officer processes your application and notifies you about the details of your new bank account.
Probably, you will need two accounts: a regular transaction account for your everyday spending and a saving account with a high-interest rate for putting money by (for example, the Choice and e-Saver accounts by Westpac). You can also involve such additional service as a personalised chequebook. Filling up the form for both accounts will take no more than 10 minutes. You also need to choose the branch where you will collect your card after arrival. Now that everything is set, you can transfer your funds. For this procedure, you need to know your bank’s address, the number of a branch, the SWIFT code and, of course, your personal account number. Transferring operation offered by a bank is very costly; you can save a lot if you handle this transfer via a Forex company (if you transfer more than 5k AUD) or, at least, such services as Currency Fair or TransferWise (for smaller sums).
Having your savings on your secure account, you can have a peace of mind while travelling to Australia and avoid dealing with the customs (you have to declare your money at the customs if you carry more than 10k AUD).
Upon arrival, you visit the chosen bank and show your documents (valid visa, passport, and Australian residential address) for getting the debit plastic card and a full access to your funds. The local law is: you cannot withdraw your money from your Australian account before you undergo this ID check. You also can get registered for the internet banking that allows you to make your transactions in any part of the world without visiting your bank. If you decide to start the procedure of opening the bank account when you are already in Australia, you can do so during 6 weeks after your arrival. You come to the bank office with your passport and apply for the account with the officer.
Many banks have developed special accounts for foreign students. They are beneficial because a student isn’t charged a monthly fee. The best banks will also appoint a personal student banker who speaks your language in order to provide a full and understandable guidance in your financial matters.
Many foreigners who are thinking about transferring their money to an Australian bank account have a logical question: must this money they transfer to AU be taxed or not? The answer is: neither money earned abroad you take along nor funds you transfer in Australia using a bank account is subject to local taxes except the interest you earn inside Australia through your saving account during your stay. There is no way that this interest can be hidden as your bank account is tied to your tax file number, and the Tax Office is aware of your financial activity.
Banking in Australia
Banks and their branches are usually open Monday to Friday (9:30 am – 4 pm). On Fridays, they work longer hours – until 5 pm. Some branches work on weekends. Thanks to ATMs and internet banking, your abilities in transferring money between accounts, making payments, opening accounts, or cashing cheques aren’t limited after the branch is closed. For using the internet banking (or the telephone one), you need to get registered with your chosen bank.
Leader banks have a dense net of ATMs all across the country giving you a 24/7 access to your funds; some of them offer a service of deposit. Don’t forget about the fee of a couple of dollars that is imposed if you withdraw money from your international card or using another bank’s ATM.
In Australia, there are lots of non-cash paying methods you can use:
- EFTPOS electronic system: get access to your transaction account and pay in shops and restaurants using your bank’s debit card and your PIN number. EFTPOS enables you even to withdraw money in some shops, petrol stations, and supermarkets.
- Credit cards of MasterCard, Visa or American Express: buy things cashless using your credit account and pay later (commonly, with an interest). Credit cards are valid in shops, restaurants and online.
- Credit debit cards of MasterCard and Visa: pay for things online and in places where EFTPOS isn’t available using the debit balance (your own money) on your credit debit account.
- Cheques: a handy alternative to a debit card especially when it comes to large payments such as a rent. You can order the chequebook in your bank of choice or, if you aren’t sure you need it all the time, make a single cheque payment from your transaction account and ask your bank for a cheque.
Can Foreigners Get Loans in Australia?
If you arrived from overseas, Australian lenders have no access to your foreign credit history, but this doesn’t mean you cannot get a loan down under. There are other criteria against which trustworthiness of a foreign recipient of a loan can be assessed. They are your visa expiry date, stable current employment, ability to repay the debt before the visa expires, assets, permanent residency, and so on. Sometimes, the lender gives money to foreigners under a higher interest rate.
Holding the permanent visa instead of the temporary one gives you better opportunities in borrowing money. For example, for buying a house in Australia, a permanent resident can claim lower interest rates and a higher percentage of the house value – up to 90% (while non-residents traditionally get the maximum of 80%). Nevertheless, holders of such provisional visas as 457 or 487 can still receive loans if they have 20% of the house value for the down payment and enough proof of their solvency (evidence of a steady overseas income or liabilities such as equities, assets, and so on). Please, also bear in mind that foreigners wishing to buy property in Australia often have to get permitted to do so by the Foreign Investment Review Board. Personal loans are available for both residents and non-residents on the same criteria.
In Australia, a foreigner has to build up a credit history and establish a reputation of a responsible debtor. Claiming too many loans in a short period of time can negatively impact your credit history.
We hope our guide will help you to avoid worries and issues and have a head start in settling your financial activity in a new country.