Bank levy will cost Westpac $260m a year

Westpac says the bank levy introduced in the federal government will increase costs by $65 million after tax in the the six months to September 30, or $260 million on an annualised basis.

The bank said the levy, which starts on July 1 would would apply to approximately $615 billion of its liabilities.

Westpac said this would equivalent to 8¢ a share, or 4.3 per cent of dividends paid based on the bank’s full year dividend of $1.88.

“The exact cost will depend on the final form of the new legislation passed and the composition of Westpac’s liabilities,” the bank said in a statement.

“No company can simply ‘absorb’ a new tax, so consideration is being given to how we will manage this significant impost on the bank. We plan to consult with stakeholders, including shareholders, on the Levy.”

Westpac said it has “strongly objected” to the levy on the grounds that targets just five companies – Westpac and its rivals Commonwealth Bank, ANZ, National Australia Bank and Macquarie Group.

“A further objection is that the levy currently has no end date, so it becomes a permanent tax impost on companies that are already amongst Australia’s largest taxpayers,” the bank said on Monday.

Westpac and its fellow banks have also objected to the fact the levy does not apply to foreign banks, something Labor is now pushing for.

But Finance Minister Mathias Cormann told ABC radio on Monday that the Coalition would not be changing its position on the international banks as this could discourage competition.

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“A feature of our major bank levy policy design is to level the playing field for smaller banks operating here in Australia, to helping them compete with the major banks,” he said.

“Foreign banks were first encouraged into the Australian market, for very good reasons, by Paul Keating in order to ensure that we had increased competition in the banking system.”