Companies are offering high fixed income returns through a product called a bill of exchange.
Bills of exchange can look and sound similar to term deposits, but they do not have the same protections and carry a high risk of losing money.
What is a bill of exchange
You may have seen offers promising higher returns than a term deposit. Before you hand over your money, check what the product really is.
It may be a bill of exchange – a private, loan to a company.
A bill of exchange is a written order to pay a set amount on a specific date.
When you lend money to a company in return for a bill of exchange, the company is promising to pay you back with interest. But unlike bank accounts and term deposits, bills of exchange are not protected by the Australian government’s guarantee on deposits.
If the company cannot repay, you may lose all your money.
Bills of exchange are high risk and extra care should be applied if considering. They are high-risk loans and are not protected by the Australian government’s guarantee on deposits.
If you’re looking for fixed income, consider regulated products like term deposits
How bills of exchange work
A bill of exchange is a type of debt. The company that issues it promises to pay you a fixed amount on a specific date. Terms can vary – common terms are from six months to 10 years.
Bills of exchange are sold directly by the companies that issue them – not through banks or licensed investment platforms.
When you invest, you are lending money directly to a company. If the company fails, you can lose your money.
Why companies use bills of exchange
Bills of exchange are legally recognised documents that can be used in business to record payment obligations between companies. They help businesses manage cash flow and manage short-term funding.
However, they are not designed as investment products for the public.
They do not come with the same protections and disclosure rules that apply to regulated financial products.
When companies use bills of exchange to raise money from the public, they are trying to raise capital more quickly and with fewer regulatory requirements than if they used a regulated investment product.
But this means you have fewer protections and fewer options for help if things go wrong.
Risks of bills of exchange
No government protection
Bank accounts and term deposits with Australian banks, building societies and credit unions are covered by the Financial Claims Scheme, which protects deposits up to $250,000 per account holder, per institution.
Bills of exchange have no such protection. If the company fails, your money is at risk.
Unregulated products
Bills of exchange are not regulated as financial products under the Corporations Act. That means the company issuing them does not need an Australian Financial Services Licence (AFSL) and you may not receive a Product Disclosure Statement. Your access to legal protections is also limited if something goes wrong. You may not be able to seek intervention or dispute resolution alternatives through the Australian Financial Complaints Authority (AFCA).
Low transparency
Companies that issue bills of exchange may be private, unlisted businesses. That can make it difficult to check what the company plans to do with your money, how much debt it has and whether it is profitable or not.
Your money may be locked up
If you need your money back early, you may not be able to get it. Some companies offer early withdrawals, but charge penalties or delay payment. Others do not allow withdrawals at all until the maturity date.
Higher risk of loss
Bills of exchange typically offer interest rates higher than term deposits. This can reflect a higher risk of the company not repaying. As a general rule, the higher the expected return on an investment, the higher the risk of the investment.
How is a bill of exchange different from a term deposit
| Term deposit | Bill of exchange | |
| Protection | Covered by the Financial Claims Scheme up to $250,000 per account holder, per institution. | None – not covered by government guarantee |
| Regulation | Regulated by the Australian Prudential Regulation Authority (APRA) | Not regulated |
| Issuer | Australian banks, building societies and credit unions | Private companies |
| Risk | Very low | High |
| Term | Usually 1 month to 5 years | Depends on issuer |
| Transparency | High | Low |
| Early access | Available, with clearly disclosed costs | May be restricted or come at a high cost |
Bills of exchange are not suitable for most investors.
If you are unsure about a potential investment, consider seeking independent advice from a licensed financial adviser who is not connected the company selling the product.
Key actions you can take
- Check before you invest
- Ignore high interest offers from non-licensed providers
- Make sure you understand how an investment works before investing
- Be suspicious of anyone offering you easy money
Case study: David seeks higher income
David, 72, saw an online ad offering 8% returns in a fixed interest account with monthly payments and no fees. The website looked professional and claimed its accounts were popular with high-net-worth clients. But David noticed a disclaimer saying the product was actually a bill of exchange, not a bank deposit. That meant it was not covered by the Australian government’s deposit guarantee. David ignored the offer and put his money in a regulated term deposit instead.