What happens to your money if an Australian bank fails?

There are two different worries hiding in the question "is my money safe in the bank?". One is that the bank goes bust. The other is that it is still standing but you cannot reach your money because its systems are down. The protections for each are very different. This guide explains both, using APRA's own pages on the Financial Claims Scheme, and then looks honestly at what physical gold does and does not add.

What happens to my money if a bank fails?

The Financial Claims Scheme is an Australian Government scheme set up during the 2008 global financial crisis. It protects depositors of banks, building societies and credit unions that are incorporated in Australia and authorised by APRA, known as authorised deposit-taking institutions or ADIs. You do not sign up or pay for it.

The scheme is not automatic. The Australian Government decides whether to activate it if an ADI fails. Once activated, APRA runs it:

1. Payment. APRA says it will endeavour to pay the majority of account holders within seven calendar days, usually by cheque or electronically to another account you nominate.
2. Liquidation. The failed ADI is wound up and its assets sold. APRA recovers what it paid out from the liquidation, and any shortfall may be recovered through an industry levy.
3. Money above A$250,000. The excess is not protected by the FCS, but you can claim it in the liquidation. APRA says account holders rank third in the order of priority for these amounts, after APRA's own payments and costs.

How does the A$250,000 limit work?

The limit is per account holder, per ADI, not per account. To work out your protected amount at one institution, APRA says to add up:

• all deposits in your name at that bank, building society or credit union;
• deposits with any other banking business it runs under a different trading name;
• an equal share of any joint accounts.

Source: APRA Deposit Checker, Types of accounts covered and List of ADIs. The rows with dollar amounts other than the joint account are our arithmetic from APRA's rules.

Which brands share one licence?

APRA's list of ADIs covered under the FCS shows several well-known brands that are trading names of a larger bank. Deposits across the brands are added together under one A$250,000 limit:

APRA also notes that accounts sold under another company's name, such as Westpac through RAMS, or Bank of Queensland under the Virgin Money Australia name, are covered as accounts with the ADI behind them. Check APRA's full list before spreading savings.

What does the Financial Claims Scheme not cover?

APRA lists these as outside the scheme:

• accounts with funds that are not in Australian dollars;
• accounts kept at overseas branches of Australian banks;
• credit balances on credit cards or other loans;
• prepaid card facilities;
• branches of foreign banks in Australia, and finance companies that are not licensed by APRA.

Shares, managed funds and physical gold are not deposits, so the FCS does not apply to them. For superannuation, APRA says the FCS covers a fund's deposit accounts at an ADI, and in most cases the A$250,000 limit applies to the whole fund, not to each member.

Has an Australian bank ever needed the scheme?

APRA says the FCS has only been activated once, in 2009, and that its existence helps support public confidence in the financial system. The scheme also covers general insurance claims of up to A$5,000 when an APRA-regulated general insurer fails. Rare use is not a guarantee, so the A$250,000 limit is still the number to plan around.

What happens during a bank outage or cyber attack?

Your balance stays the same; your access does not. A bank's IT failure means the record of what it owes you is still there, but you may not be able to log in, tap your card, transfer money or use an ATM until systems are restored. A cyber attack is a cause of disruption, not a change in what you own. If an attack ever made an ADI fail, the FCS rules would apply in the usual way.

The practical lesson is the same as in a bushfire or flood. Get Ready Queensland's emergency kit includes spare cash in case payment systems are down. A second account and card at an unrelated bank also helps. Our guide to how much cash to keep at home works out a figure for three days.

What can you do to protect your money?

1. Check your bank is on APRA's list. If it is not, your deposits may not be protected.
2. Keep each pot under A$250,000 per ADI. Count trading names and your share of joint accounts.
3. Have a second bank card with an unrelated bank, so one outage does not stop all payments.
4. Keep some cash at home. See our emergency kit checklist.
5. Keep records. Download statements now and then.
6. Know what is outside the FCS: foreign currency, investments, crypto and physical gold.

Where does physical gold fit in?

Gold answers a different question. A bank deposit is a promise: the bank owes you money, and the FCS backs that promise up to a limit. Physical gold is not a promise. If you own a coin or an allocated bar, it is your property, and its existence does not depend on any bank staying solvent or online.

That has real limits. Gold has no FCS protection and no guaranteed value: its price moves every day and can fall sharply. You cannot spend it in a shop during an outage, and selling it needs a dealer and a working payment system. If you keep it at home, contents policies often cap cover: RACV's PDS groups sovereigns and bullion with collections, capped at A$2,500 in total. Our guide to gold as a safe haven looks at how it behaved in past crises in Australian dollars.

What happens to vaulted gold if the provider fails?

It depends on whether the gold is allocated (specific bars or coins held in your name) or unallocated (a claim on the provider for an amount of metal). Allocated metal should remain your property and stay off the provider's balance sheet, so its creditors should have no claim on it. Unallocated gold is closer to a bank deposit, without the FCS. Read the storage terms before you buy. Our explainer on allocated vs unallocated gold covers the difference, and our gold storage guide compares the options.

If you decide to buy gold, compare dealer prices first. These are listed for information, not as a recommendation.

Check Perth Mint prices Check ABC Bullion prices

For more on buying, tax and storing gold, start at our Australian gold hub, read how gold is taxed in Australia or see holding gold in an SMSF.

This guide is general information, not financial advice. FCS rules can change; check apra.gov.au for the current position before making decisions.

Not financial advice. GoldVetted provides general information to help you compare options. It is not personal financial, tax or legal advice. Gold prices go down as well as up, and you may get back less than you pay. Check tax rules with the official source or a qualified adviser before you act.