Who provides it?

Many Australian banks, as well as foreign banks with Australian subsidiaries, offer foreign currency accounts domiciled in Australia. Alternatively, overseas banks may provide local currency accounts to Australian businesses.

You might be able to open a foreign currency account with an overseas bank that has an alliance with your Australian bank.

Some Australian banks have overseas branches which provide accounts in local currencies.

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 Foreign currency account 

What is it?

An account you hold with your bank in a currency other than Australian dollars.

How does it work?

A foreign currency account enables you to deposit in the account export contract payments you receive in that foreign currency and to use those funds to pay expenses invoiced in the same currency. You receive and use the funds without converting to and from Australian dollars, and therefore without exposure to movements in exchange rates.

In addition, if the funds are held in a widely accepted foreign currency (such as US dollars), you may be able to settle transactions with sellers and suppliers from various countries using that currency, rather than dealing with several different currencies.

A foreign currency account may be domiciled in Australia or abroad. If the account is abroad, you’ll need to obtain professional advice on the local laws and regulations (particularly taxation) which apply to accounts held by foreign business entities, including those regarding transfer of funds to Australia or a third country. Different rules may apply if you have a subsidiary in the country where you intend to open the account.

Foreign currency accounts domiciled in Australia are available in most major foreign currencies.

Your Australian bank might also provide an overdraft facility on your foreign currency account, giving you a line of credit in that currency up to an agreed limit. An alternative form of credit to a foreign currency overdraft is a foreign currency loan.


What are the pros and cons?

Pros Cons
Allows you to settle transactions in a foreign currency without converting to and from Australian dollars Operating an offshore account can add another layer of laws and regulations to your business administration
Allows you to hold export contract receipts in a foreign currency until required for conversion into Australian dollars    

What costs are involved?

  • Fees vary for establishing and operating a foreign currency account in Australia or an offshore account.
  • You may also be charged exchange commissions and transfer fees when you transfer foreign currency funds to an Australian-dollar account.
  • Interest rates on foreign currency overdrafts reflect the interest rates which apply to that currency.

 

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