What is a deposit guarantee?

The deposit guarantee was setup by the Australian Government with the aim of ensuring financial stability for the Australian economy during the global financial crisis. The aim of the guarantee is to increase the confidence of individuals investing deposit balances of up to $250,000 per institution into online savings accounts or a term deposit for instance, by protecting their investment. This means that if the financial institution covered by the guarantee runs into trouble, investors will be able to recover their money from the government.

The $250,000 cap

The cap is $250,000 per person, per Authorised Deposit-taking Institutions (ADI). This means that you can have multiple nominations of $250,000 guaranteed as long as each amount is with a different ADI. Anything over $250,000 per ADI won’t be guaranteed.

ADI’s and brands

It’s important to be aware that ADI’s can cover multiple brands. This means that putting $250,000 in three separate branded accounts under one ADI will only cover one lot of $250,000 not the whole $750,000. So make sure you ask your bank which ADI they are with.

In the case of joint accounts, each couple is entitled to an individual $250,000 guarantee.

To get a detailed list of all the banks that are covered under the Australian government deposit guarantee and for more information visit the Australian Prudential Regulation Authority (APRA)website.

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