Government Guarantee - Financial Claims and Deposits

The Government has amended various changes in relation to the Government Guarantee regarding financials, claims and deposits.

• Existing A$1 million cap – will continue to apply until 1 February 2012

• Permanent cap introduced – a permanent guarantee cap will be introduced from 1 February 2012, subject to the continued advice of financial regulators that this remains appropriate

• Amended cap level – from 1 February 2012 the permanent guarantee cap will be revised to $A250,000 per account holder per institution.

Impact

Effective from 1 February 2012 the guarantee will apply to aggregate retail cash deposits of up to $A250,000 held by any one account holder with an eligible institution. This new guarantee cap will be permanent, which the Government comments is subject to the continued advice of financial regulators that it remains appropriate.

Is this amended cap effective now?

No. The permanent guarantee cap will be introduced from 1 February 2012. The Government commented that it has provided over four months’ notice to allow sufficient time for institutions to communicate the changes and transition to the new settings.

The existing $A1 million cap will continue to apply until the permanent $A250,000 cap comes into effect on 1 February 2012.

What to do now?

Those of you who are concerned about government backing of your deposits may need to (subject to financial advice) consider a break up of your deposits between the various banks and institutions so as to ensure you are a beneficiary under the cap.

Disclaimer - The material contained in this newsletter does not constitute advice. DPL is not responsible for any action taken in reliance on any information contained in this newsletter. Anyone reading the newsletter should not act upon material contained in this newsletter without appropriate consultation.