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Why business and personal should never mix

If there's only one thing you do this year, it should be to separate your business account from your personal account.

By Thea Cowrie

The above advice is from Debra Anderson, owner of leading MYOB consultancy Anderson Tax & Consulting.

“Separating business and personal accounts is the number one tip I give people,” says Anderson, who sits on advisory boards for the Australian Tax Office and MYOB.

“It will save you money in the long run and if you don't keep them separate you're creating a headache for yourself down the track.”

It's never too early, Anderson stresses: “The minute you've got an ABN, open a separate account”.

Structuring your accounts

At a bare minimum, every business should have two dedicated bank accounts. The first being a business transactional account with a linked debit or credit card.

Once you've set that up, quit cash and try to do all your transactions electronically, Anderson advises.

“If you're paying cash out of your wallet it's very easy to lose your receipt or forget about it but if you pay electronically out of your business account you can always go back and find the transaction,” she explains.

“That means you're not missing out on claiming GST if you've registered for it and you're not missing out on claiming tax deductions.

“Whether it's $3.50 for coffee or $5 for parking, over a year it really adds up.”

Your second account should be where you set aside money for tax and GST liability so you avoid any nasty shocks down the track.

“Until you lodge your first tax return you're not paying any tax on your earnings then, usually in year two, you get a tax bill for year one plus all of a sudden you also get hit with provisional tax,” Anderson explains.

“It's often one of the most painful points for small business if they're not prepared.”

See your business grow

If you're paying for office stationery from the same accounts as your groceries it's much harder to measure how your business is tracking and growing.

“A lot of small business people don't use accounting systems so the only way they can really work out how their business is going is by how much is in the bank,” Anderson explains.

She admits even she struggled to keep up before making a clean break between personal and business accounts.

“I got stuck a few years ago saying, 'where's all my money going?'” Anderson recalls.

“I didn't know whether it was me or my business sucking the money. And I'm an accountant. How is someone else supposed to work it out?

“I ended up working out I just like champagne a little too much, but at least once I started separating everything out, I knew where the cash was going.”

Tax and accounting benefits

While separating your accounts is a great way to make sure you don't miss out on tax deductions, it also helps to guard against mistakenly claiming personal expenses.

And if the ATO audits you three years down the track it will be much easier to recall your transactions.

“This one always scares people,” Anderson says.

“If you've kept everything in the one account the ATO is going to say 'What's this? What's that? How do I know this is business and that is personal?' They're going to have to look through all your transactions.”

Keeping things clear cut is likely to save you accounting fees while giving your accountant time to complete tasks that are more valuable to your business.

“I was doing a tax return last week for a client who said, ‘Oh, I don't have many transactions. I keep all my accounts separate’,” Anderson recalls.

“But 70% of the transactions on her bank statements ended up being personal, which is heartbreaking because I think, ‘Oh gosh. I've got to charge you for this’."

Banking benefits

Taking it one step further and opening a bank account that's tailored specifically to your business needs can also help make your life easier and more profitable.

Just like with online dating, the internet has made everything available with just a few clicks, meaning there's absolutely no excuse for mixing your business and personal lives.

“It's a lot easier than people think. You don't have to go into a branch, you can set up an account online in about five minutes,” Anderson says .


The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.

Things you should know

Deposit Accounts for Business Customers Terms and Conditions (PDF 286KB)

To be eligible to apply for Business One – Low Plan, your business must be registered in Australia.

General advice: This information is general only and does not constitute any recommendation or advice. It is current at the time of publication, and is subject to change. It has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on the information, consider its appropriateness, having regard to these matters. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this document, including when considering the finance options for your business.