Do You Need a Business Bank Account in Australia?
Companies must have a business bank account; sole traders do not legally need one but it is strongly worth it. What to look for, and how to avoid the fees.
By Timothy Hirou GaschereauPublished 9 min read
"Do I need a business bank account?" is one of the first questions people ask when they start out. The honest answer depends entirely on how your business is structured, and for the biggest group (sole traders) the legal answer and the sensible answer are different.
Here is who must have one, why a separate account is worth it even when it is optional, and how to avoid paying for it.
🎯 The essential: A company (Pty Ltd) or a trust must have a bank account in the entity's name; there is no choice. A sole trader or partnership is not legally required to, and can use a personal account, but a separate account is strongly recommended: cleaner bookkeeping, far easier BAS and tax time, a clean paper trail if the ATO reviews you, and a more professional look. Many banks need an ABN to open a business account, and a sole trader can often just open a second personal account labelled for business to dodge the fees.
The legal answer depends on your structure
The short answer is: it depends on how your business is set up.
A company is a separate legal entity under the Corporations Act, with its own ABN, ACN and TFN, so mixing company and personal money is legally problematic and can expose directors to personal liability. A trust must bank in the trustee's name as trustee for the trust. A sole trader, by contrast, is not a separate legal entity, so there is no legal requirement, though the practical case is strong. If you are weighing structures, see ABN vs ACN and sole trader vs company.
So why bother as a sole trader?
You are not required to, but here is why most accountants tell you to anyway:
- Cleaner bookkeeping and BAS time: one account, one purpose, so reconciling takes minutes not hours, and separating GST from revenue is far easier.
- A clean paper trail if the ATO reviews you: no explaining which transaction is a business expense and which is your streaming subscription.
- Separating tax and GST money: a dedicated account makes it much harder to accidentally spend money that belongs to the ATO.
- Looking professional: clients paying a business-style name signals you take the business seriously.
- Seeing if you are actually profitable: a separate account gives a real-time view of business cash flow.
What to look for in a business account
Compare monthly fees (often $10 to $20, though the major banks offer $0 digital-only options), transaction limits, and whether the account connects via bank feeds to Xero, MYOB or QuickBooks, which saves hours at BAS time. Check for a linked debit card, whether extra cards cost more, and note that most business transaction accounts pay little interest (pair one with a savings account if you want a return). Most banks require an ABN to open a business account; if you do not have one it is free to register with the ABR.
The sole trader shortcut: a second personal account
Many sole traders avoid business-account fees entirely by opening a second personal everyday account at their existing bank and using it exclusively for business. This is perfectly legal, functions the same way for bookkeeping, and costs nothing extra. The downside is it is in your personal name (less professional on invoices), and some banks restrict personal accounts to non-commercial use, so check the fine print. Label it clearly in your app (for example "Business, Bloom Design") and never spend from it personally.
Setting aside GST and tax in a sub-account
One of the most common mistakes sole traders make is spending money that belongs to the ATO. The money sits in your account, it looks like yours, then a tax bill arrives. Set up a linked savings account called "Tax and GST" and move the set-aside across every time you get paid, automatically if you can: roughly 10% of a GST-inclusive invoice for GST if registered, and 25 to 30% of net income for income tax as a starting point (adjust to your situation). This one habit prevents the classic surprise-tax-bill cash-flow crisis. Our paying yourself guide shows how it fits with drawings.
Personal account vs business account (sole trader)
| Feature | Personal account | Dedicated business account |
|---|---|---|
| Legal requirement | Not required | Not required |
| Monthly cost | Usually free | $0 to $20 |
| In a business name | No | Yes |
| Bookkeeping clarity | Mixed with personal | Clean, business-only |
| Software bank feeds | Limited (varies) | Usually full support |
| ABN needed to open | No | Usually yes |
For most sole traders earning above roughly $50,000, a dedicated account pays for itself in time saved at BAS and tax time; $120 to $240 a year buys back several hours of accountant time and a lot of stress.
Frequently asked questions
Do I legally need a business bank account as a sole trader in Australia?
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No. As a sole trader you are not legally required to have a separate business account and can use your personal account. However, a separate account is strongly recommended for cleaner bookkeeping, easier tax time, and looking professional.
Does a Pty Ltd company need its own bank account?
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Yes. A company is a separate legal entity under the Corporations Act, so it must have a bank account in the company's name. Mixing company and personal funds creates serious legal and tax problems and can expose directors to personal liability.
Can I use a personal account for my business as a sole trader?
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Yes, legally. Many sole traders open a second personal everyday account and use it exclusively for business. It will be in your personal name rather than a business name, but it works fine for bookkeeping. Check your bank's terms, as some restrict personal accounts to non-commercial use.
Do I need an ABN to open a business bank account?
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Most banks require an ABN to open a business account. If you do not have one, you can register for free at abr.gov.au, which takes about 10 to 15 minutes for most sole traders.
How much does a business bank account cost in Australia?
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It varies. Some accounts are free (often with digital-only conditions), others charge $10 to $20 a month. The major banks all offer $0 monthly-fee options for sole traders who bank electronically. Compare monthly fees, transaction limits and features before choosing.
How should I handle GST and income tax as a sole trader?
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Set up a separate savings sub-account and transfer your set-aside amounts every time you get paid: roughly 10% of GST-inclusive invoices for GST (if registered), and 25 to 30% of net income for income tax. Adjust to your actual situation and check with your accountant.
Business account or a second personal account for a sole trader?
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A business account is marketed for businesses, often has accounting-software integration and a business name, and usually needs an ABN. A second personal account is in your name, usually free, and works for basic separation. For most sole traders starting out, a second personal account is a practical, cost-effective start.
Keep reading
Books worth reading
📚 Recommended reading
The Barefoot Investor
Scott Pape
The Barefoot Investor
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Australia's best-selling money book ever. A simple system for accounts, budgeting, debt and a real emergency fund in one.
Making Money Made Simple
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Making Money Made Simple
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Australia's classic, comprehensive money guide covering tax, super and investing, updated for today.
On Your Own Two Feet
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On Your Own Two Feet
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An Aussie financial planner's essential guide to money independence for women, covering every life stage from single to separated. Warm, practical and genuinely on your side.
Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
Sources
- business.gov.au, set up your business bank account
- ATO, running a business as a sole trader
- ASIC, registering a company
- ASIC Moneysmart, managing your money
General information only, not financial, legal or tax advice. It does not take your circumstances into account. Bank fees and features change, so compare current accounts and check with a registered accountant before deciding.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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