WEALTH: Banks hit with major levy, but who will pay?

May 9, 2017

Treasurer Scott Morrison announced a new tax on Australia's big four banks plus Macquarie designed to help towards budget repair. He said the tax was designed to generate a “fair contribution from our major banks, similar to measures imposed in other advanced countries” and would “even up the playing field for smaller banks”.

The new tax applies to many of the different types of borrowing that banks use to fund their lending. This includes corporate bonds and deposits over $250,000, but excludes shareholders' capital and smaller deposits even though these are still covered by the Government's guarantee.

The new tax will apply from 1 July to deposit-taking institutions with licensed liabilities of $100bn or more, which scoops up the five major banks. Commonwealth, NAB, ANZ, Westpac and Macquarie will each pay 0.06% of their liabilities. The tax could potentially yield $6 billion over four years.

The new tax is unlike the previous bank deposit tax in that it does not take into account deposits below $250,000. It does not apply to superannuation funds or insurance companies.

The effect of the tax is likely to be reflected in the banks’ charges to customers in the form of increased home loans rates, as well as possibly other fees and charges.

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