SMEs set to pay for the government’s $6 billion bank tax

tax scam

Source: AAP Image/Joel Carrett

Experts say small business customers can expect to be hit if the banks pass on the costs of the bank deposits levy announced on Tuesday as the big four goes head-to-head with the government.

The 2017 federal budget put the financial sector in the government’s crosshairs, with policies to review dispute resolution and competition in the sector, as well as a bank levy of 6 basis points on banks with liabilities exceeding $100 billion, which is expected to raise $6.2 billion in revenue over four years.

The big four banks have hit out at the move, labelling the levy is “regrettable policy”, and claiming “a tax cannot be absorbed”.

Commonwealth Bank chief executive Ian Narev said in a statement the bank will be waiting for more details from the government before attempting to “strike the right balance to ensure we continue to enhance the financial wellbeing of people, businesses and communities”.

Meanwhile, ANZ labelled the move “regrettable policy”, saying the banking sector is an “easy political target”.

“The reality is this is a tax on the millions of ordinary Australians who are bank shareholders and bank customers,” the bank said.

NAB’s chief executive Andrew Thorburn said, “a tax cannot be absorbed…It is not possible to impose a tax without an impact on people, and therefore the wider community”, while Westpac’s chief executive Brian Hartzer observed, “There is no ‘magic pudding’. The cost of any new tax is ultimately borne by shareholders, borrowers, depositors, and employees”.

The government has said the policy represents a “fair contribution” to the community, but experts tell SmartCompany that no matter which way it’s sliced, small business owners will be among those facing costs if the levy is passed onto consumers.

“I think commercial reality would say that this is an impost, a cost on the bank and whether, not so much directly, but indirectly I think you could expect the banks will try to pass on the cost through additional charges, [or] reduction in deposit rates,” says John Brazzle, a tax specialist and managing partner at Pitcher Partners.

“I think just from talking to our client base, I think they all recognize this is a cost the banks are trying to pass on. They’ll wear it in some way.”

Brazzale says this reality sits against a budget that didn’t have much to offer small and mid-sized businesses beyond the extension of the $20,000 instant asset tax write-off.

“There’s nothing really in it for small business over and above the tax cuts that have been announced,” he says.

Neil Slonim, an independent banking commentator and founder of, believes the banking sector would have been caught off guard by the government’s policy suite and SMEs will likely bear some of the cost. Meanwhile, the financial system will continue to battle government as the spectre of a Royal Commission into the sector remains.

“It would have come as a big surprise to them … but somehow, somewhere along the line, bank customers will pay,” Slonim says.

“SMEs are an important [customer] segment in that and will bear at least some of it.”

After a number of inquiries and reviews of the banking sector over the past year, including Small Business Ombudsman Kate Carnell’s inquiry into small business lending, it’s obvious the community wants to see more action on curbing power of the banks, Slonim says, and the sector is unlikely to find “great sympathy” from the community.

However, while the government has deliberately “upped the ante” in the budget, the story is far from over, Slonim says.

“The banks have responded as we would expect them to, but unless the banks can get their heads together and agree on some meaningful reforms in the short term, the prospects will continue for a Royal Commission,” he says.

Meanwhile, however, it’s not unreasonable to expect business customers will be affected by the levy, he says.

“Whenever big businesses have to take on new impost, small businesses are affected,” Slonim adds.

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Thai Pacific
Thai Pacific
4 years ago

Someone has to pay. For this cost we can look to the recurring non Finianced cost of welfare that the Rudd, Gillard Rudd government left us. They loaded the system just before the election and the new Government have failed every attempt to repeal, modify or adjust the load. Now not only those who voted for it will pay but everyone else in the country as well.
If you lie down with dogs you get fleas, now we all scratch.

Rohan Baker
Rohan Baker
4 years ago
Reply to  Thai Pacific

All of this is true Thai, but the fact of the matter is that the Turnbull government is supposed to be conservative. So instead of giving us a budget that looks to promote free enterprise (cutting red/green tape, lowering taxes and industrial relations reform) we get an ALP style tax and spend budget. On top of that, masses of big expenditure without any business plan of feasibility study for the inland rail (god, not this old fossil dragged out again) and pumping water back up the snowy.

Lets not forget that Turnbull attempted to join the ALP on 4 separate occasions prior to joining the Liberals.

So they’re looking at increasing taxes by just over 7% overall. As they are at 24-25% of GDP that removes 1.68-1.75% of discretionary spending and investment from the economy for very little to no gain.