About bank guarantees
6-minute read
Here are some details to help you get a better understanding of bank guarantees.
Prefer a summary of the main points? Get an overview of bank guarantees.
Applying for a bank guarantee
What’s a bank guarantee?
It is a written promise on your behalf that a financial institution like Westpac will make a future payment to the beneficiary if they make a claim on the bank guarantee. With a bank guarantee, you don’t need to pay an upfront deposit to the beneficiary for things like a rental or retention bond.
How do I get a bank guarantee?
1. Have the following details handy:
- Beneficiary’s legal name or if it’s a business, the beneficiary’s ABN or ACN
- Beneficiary’s address (no PO boxes)
- Bank guarantee purpose
- Amount ($5,000 minimum)
- Expiry date
Note that you’ll be required to open a term deposit to secure your bank guarantee. If you’re a new Westpac customer, you’ll need to visit a branch to verify your identity before applying.
2. Request a callback or call 1300 136 345 to discuss your requirements and how to submit the required documents.
3. Collect your bank guarantee from a branch (bank guarantees can only be issued in paper form).
Who can be a beneficiary?
A beneficiary must be one of the following:
- An individual
- A business with a valid Australian Business Number (ABN), Australian Company Number (ACN) or Australian Registered Body Number (ARBN)
- A government entity
- A not-for-profit organisation
- A trustee
Bank guarantees can’t be issued to foreign entities residing outside of Australia.
What information is in a bank guarantee?
It is a paper document that contains the following:
- Issuer’s details (Westpac)
- Your details
- Beneficiary’s details
- Purpose of the bank guarantee
- Expiry date
- Terms and conditions
What information is required to explain the purpose of a bank guarantee?
Bank guarantees can only be used for business purposes. The purpose should specify what the bank guarantee is for. Examples include:
- Security deposit bond: A deposit or bond for contractual obligations related to the business e.g. Suite 1, Level 1, ABC street, Sydney NSW 2000
- Lease/rental bond: A rental bond for a commercial lease e.g. Lot 1 Unit 1, ABC St, Sydney NSW 2000
- Contract performance guarantee: A bond to a business supplier for the delivery of goods or services e.g. Project Terex Valley Subcontract no. WQX114
- Retention bond: Retentions being withheld under construction contracts e.g. retention for construction works at A04 utility room project SOW-C884.
What fees do I need to pay?
There are two types of fees:
- Establishment fee: An upfront fee charged when the bank guarantee is prepared.
- Service fee: An ongoing fee charged half-yearly in advance.
The following are the existing fees:
| Security type & amount | Fee based on expiry | |
| Less than 5 years | Longer than 5 years or without expiry date | |
| Cash-secured bank guarantee up to $250,000 | Establishment fee: $250
Service fee: 2.50% p.a. (minimum $200 p.a.) |
Establishment fee: $250
Service fee: 3.00% p.a. (minimum $240 p.a.) |
| Contact us about fees for bank guarantees over $250,000 secured using cash or other assets. | ||
How long does it take to issue a bank guarantee?
For cash-secured bank guarantees up to $250,000, it will take at least 1 to 3 business days from the day you’ve signed an agreement with us and your term deposit is ready. For other types of security or bank guarantee amounts, contact us to discuss the time required.
Can I secure a bank guarantee using multiple term deposits?
No, the bank guarantee can be secured using only one term deposit.
Expiry dates, cancelling or updating a bank guarantee
What’s the difference between a bank guarantee with an expiry date and one without an expiry date?
The expiry of a bank guarantee is typically aligned with the date when your contractual obligations to the beneficiary finishes. Once the bank guarantee expires, you’ll no longer be charged a service fee and the beneficiary can’t make a claim on the bank guarantee. There may be circumstances where you may prefer to have an expiry date that exceeds the contract end date. For example, some people may add an extra 3 to 6 months to the expiry date of bank guarantees for commercial leases to cater for business uncertainties. You can also extend the expiry date in future if your contract extends beyond the original date.
For a bank guarantee that doesn’t expire, you’ll continue to pay the service fee and your security can’t be released unless the original bank guarantee is returned to us for cancellation. Additionally, a bank guarantee with no expiry could allow the beneficiary to make a claim after your contract ends. If this happens, we’ll be required to use your security to pay the beneficiary.
Can a bank guarantee be cancelled?
Yes, they can be cancelled if one of the following occurs:
- The bank guarantee has expired
- Westpac pays the full amount of the bank guarantee to the beneficiary
- The beneficiary no longer requires the bank guarantee
You must return the original bank guarantee to a branch. If it is lost or misplaced, the beneficiary must contact us to discuss the next steps.
What happens to my security when a bank guarantee expires or is cancelled?
For cash-secured bank guarantees, your term deposit will continue to earn interest until it matures unless you’ve given us instructions to cancel and release it. The instructions must be provided a minimum of 31 business days before the maturity date. An interest rate reduction may apply if the term deposit is terminated early – refer to the Term Deposits Terms and Conditions (PDF 315KB) for more information.
If you wish to release a non-cash security, contact us or visit a branch to discuss your options.
If a bank guarantee is cancelled, can I leave my term deposit open until it matures?
Yes, you can.
If my term deposit amount exceeds that of the bank guarantee, can I access the difference in value before the bank guarantee expires or is cancelled?
No, the difference can’t be withdrawn. The term deposit needs to be held as security until the bank guarantee expires or is cancelled.
If a bank guarantee is secured with a non-cash security, how do I access it after my bank guarantee is cancelled?
Please contact us or visit a branch to discuss your options.
Can the details in a bank guarantee be updated?
Yes, they can. Please contact us to discuss the updates with a bank guarantee specialist.
Making a claim
Who can make a claim on a bank guarantee?
Only a beneficiary can make a claim. To do so, they must visit a branch and submit:
- the original bank guarantee, which will be exchanged for a bank cheque
- written instructions with the following information:
- claim amount and whether it relates to a partial or full claim
- signature of the authorised representative
- business or government entity’s letterhead, address, contact number and email address, or individual’s name, address, contact number and email address
- details required to receive the payment in the form of a bank cheque, including:
- the beneficiary’s name or entity (as stated in the bank guarantee) that the cheque is payable to
- the branch where the cheque will be collected
- name and contact details of the person collecting the cheque. A photo ID is needed upon collection.
If the original bank guarantee is lost or misplaced, the beneficiary must contact us to discuss the next steps.
When can a beneficiary make a claim on a bank guarantee?
They can claim a payment when you have not met your obligations under the contract for which the bank guarantee has been provided as security. If this happens, we’ll notify you via email after the payment is made to the beneficiary.
How does a beneficiary receive payment for a claim?
Payment is made via a bank cheque, which they’ll need to collect from a branch.
Can a beneficiary make a claim on an expired bank guarantee?
No, they can’t. When it expires, any obligations under the bank guarantee automatically ceases.