The Financial Claims Scheme Explained

Key takeaways

• $250,000 per account holder, per ADI - not per account.
• Multiple brands can sit under one ADI licence and share a single limit.
• Joint accounts are treated as each holder having an equal share.
• Shares, managed funds and foreign bank branches are not covered.

How does the limit actually work?

The cap applies to the total of your deposits with a single ADI, aggregated across accounts, and it applies per account holder. Four accounts at the same bank totalling $400,000 are covered to $250,000, not to $1,000,000.

Joint accounts are treated as each holder having an equal share, and that share counts towards each holder's individual limit at that ADI. A couple with a $400,000 joint account are each treated as holding $200,000, which sits within each of their limits.

The most consequential subtlety is brand versus licence. Several Australian banking brands operate under a single ADI authorisation. Deposits held across two such brands aggregate to one $250,000 limit, even though the two look like separate banks.

What is covered and what is not?

The scheme also covers policyholders of a failed general insurer, which is less well known and separately administered.

How would a payout work?

The scheme is activated by the Australian Government when an ADI fails and APRA is appointed. APRA then administers the payout, using the failed institution's records to identify account holders and balances.

APRA has stated an objective of paying the majority of depositors quickly once the scheme is activated, and requires ADIs to maintain systems capable of producing a single customer view so that balances can be aggregated fast. Payment is generally made without depositors needing to lodge a claim.

Practically, the scheme has never been activated for an Australian ADI. That is worth knowing when weighing how much effort to spend structuring around the limit - though for balances well above $250,000, spreading across genuinely separate ADIs remains the straightforward answer.

Frequently asked questions

Is the $250,000 limit per account or per bank?

Per account holder per ADI, aggregated across all your accounts with that institution. Splitting money into several accounts at the same bank does not increase the protection.

Do two brands owned by the same bank get separate limits?

No. The limit applies per ADI licence. If two brands operate under one ADI authorisation, deposits across both share a single $250,000 limit. APRA's register of ADIs shows which brands sit under which licence.

Are joint accounts covered differently?

Each holder of a joint account is treated as having an equal share, and that share counts towards their own limit at that ADI. A couple therefore has effective coverage of $500,000 on a joint account, provided neither holds other deposits at the same institution.

Is my offset account covered?

An offset that is structured as a deposit account with an ADI is generally covered as a deposit. Confirm the account type with your lender, since some offset arrangements are structured differently.

Related reading

• Mutual Banks and Credit Unions
• APRA, ASIC, RBA and the ACCC: Who Regulates What
• Foreign Banks Operating in Australia

Sources

• Financial Claims Scheme — APRA
• Banking Act 1959 — Commonwealth of Australia