Before 2012, under the Financial Claims Scheme (FCS), deposits in Authorised Deposit-taking Institutions (ADIs) such as banks, buildings societies, and credit unions were guaranteed by the government up to an amount of $1 million. Under the revised Scheme, the updated permanent cap was reduced to $250,000.

The Australian government guarantees bank deposits up to $250,000 put in ADIs. The said amount is safe and is guaranteed to be received by depositors whatever happens to the ADI, such as the instance of bank closure.

Amounts exceeding the cap will not be covered by the Scheme. So, for a savings deposit worth $400,000, the excess of $150,000 won’t be covered if ever the bank shuts down its operations. It’s still possible to recover the excess amount, though, when the bank assets are liquidated to pay its clients.

The FCS guarantee applies per person, per ADI only. So, if savings worth $250,000 is deposited in Bank A and another $250,000 in Bank B, then they’re both guaranteed. But if there are two accounts under Bank A, each with $250,000 deposited in them, only a maximum of $250,000 is guaranteed since both accounts are under the same ADI.

Similarly, if there are five accounts under the same ADI with $50,000 deposited on each of them, the amount on all the accounts will be covered since they’re still within the FCS cap.

For joint accounts, each account holder is entitled to the $250,000 guarantee. So, for a joint account with a $600,000 deposit, up to $500,000 can be covered under the FCS.

Some financial institutions operate multiple banking businesses trading under different brands. However, they all belong under one banking license which means the FCS limit of $250,000 applies to all the accounts under the different trading names.

Money deposited into different products offered by the ADIs is covered up to a combined amount of $250,000. For instance, the $150,000 deposited in a savings account and the $100,000 put in a cheque account are both covered. Any amount in excess of the cap is at risk of being unprotected.

The ASIC provides a list of financial institutions considered eligible ADIs. Included are finance companies incorporated in Australia, Australia-owned banks, credit unions, buildings societies, and foreign subsidiary banks. Under these ADIs, there are the specific accounts covered by the FCS:

-          call accounts

-          cash management accounts

-          cheque accounts

-          current accounts

-          debit card accounts

-          farm management deposits

-          mortgage offset accounts

-          pensioner deeming accounts

-          personal basic accounts

-          retirement savings accounts

-          savings accounts

-          term deposits

-          transaction accounts

-          trustee accounts

The FCS applies only to accounts with funds deposited in Australian dollars. Aside from this, deposits under the following bank accounts aren’t covered by the FCS:

-          accounts in Australian banks, credit unions, and buildings societies located overseas

-          prepaid card facilities

-          ‘nostro’ and ‘vostro’ accounts of foreign institutions

-          loans and credit balances

The Australian government mandates ADIs to put a specific seal on bank products that are covered by the guarantee. Absence of the seal may indicate that the product isn’t guaranteed. Asking the financial institution about the guarantee coverage would be the best course of action to ensure the product to be used is protected.