Of course it can…and you don’t need to do a thing.
In this ever-changing economic environment, earning interest on your business savings account can be an easy way to earn a passive income. No matter the size of your company, big or small, businesses can be earning interest right now; so let’s delve deeper.
Change is inevitable in every business. Sometimes an economic downturn can affect your operations or times could be more prosperous. However, with a bit of homework, your business savings portfolio can ride the wave of these fluctuations.
What is a business savings account?
Businesses and sole traders operating in Australia can open a business savings account. When applying for an account, each applicant simply needs to provide information to identify and verify the identity of the business.
A business savings account acts just like a regular personal savings account by allowing businesses to put aside funds to earn interest. The business savings account might hold a lump sum dedicated to paying staff leave entitlements, quarterly BAS payments and other taxes, savings for property acquisitions or a pool of funds for future business development.
Earning interest on surplus funds is a great way to generate a passive income.
What to compare in a business savings account?
The most effective business savings accounts will match the products and services that best suits your business needs. It is worth considering:
- Does the business savings account pay interest? If so, what is the rate? Is it tiered or a linear (flat) rate of interest?
- The rate of interest paid; is it a bonus or an introductory honeymoon rate?
- Do you need an ABN or ACN or both?
- What are the fees and charges? Be mindful of account-keeping and dishonour fees.
- Ease of access; do you have access to your funds on the go via a secure banking app?
- Does the account offer inquiry or data-only access for assigned employees?
- Does the account allow bank feeds for automated data uploads to your accounting software?
- Are there any limitations with the number and/or the volume of transactions made per month?
Do businesses need to declare interest earned?
Yes they do. Just like a personal savings account, you will need to declare the interest earned on your business savings account as a taxable earning. Be sure to keep statements handy for tax time.
You might also need to be aware that when opening a business saving account with a financial institution that is an Authorised Deposit-taking Institution (ADI) and regulated under the Banking Act and by APRA (in Australia), that deposits of up to $250,000 per account holder per ADI is guaranteed. This ensures business owners will have peace of mind that those funds are protected under the Financial Claims Scheme.
Taking the time to compare business savings accounts and find the best account that suits your business needs may pay you a healthier passive income in the end.
If you are in the market for a new business savings account, then it would be worth considering an LLL Business Savings Account, which pays variable interest and has no fees or charges – at all and can help you build your business’ wealth.
The LLL prides itself on providing savings accounts that are simple to operate, with a variable interest rate and no fees or charges. The LLL has a variety of savings accounts: personal and joint accounts; guardian accounts for children; and business accounts, including for self-managed super funds and not-for-profit organisations.
As an Authorised Deposit-taking Institution (ADI), the LLL is regulated under the Banking Act and by APRA.
This advice is general in nature and does not take into account your personal situation, needs or objectives. Please consider the Disclosure Documents to decide if this product is right for you.