Westpac says new major tax to impact 2H17 by $65M after tax
- Author: Zachary Reyes May 22, 2017,
May 22, 2017, 15:59
Westpac reckons it will take a $65 million hit in its current financial year from the government's new bank levy.
The lender said on Monday the 0.06 per cent levy is expected to apply to $615 billion of liabilities when it kicks in on July 1, which works out at about $260 million after tax on an annualised basis.
Australian bank stocks are very popular among retail investors given they yield over 5%.
The levy - a surprise announcement in this month's budget - has infuriated the big five banks, who argue they are already Australia's highest taxpayers. No company can simply "absorb' a new tax, so consideration is being given to how we will manage this significant impost on the bank".
"However the actual cost will not be known until the final legislation for the tax has been passed and we can fully assess its impact on NAB's business", the NAB chairman, Ken Henry, said in a note to shareholders. Last week, Assistant Treasurer Michael Sukkar did not rule out including foreign banks and Queensland MP Andrew Laming says they should be taxed as well. You know, I know and the government knows that a tax can not be "absorbed". Westpac is the first bank to release an estimate of the levy's impact.
In effect then ever since the GFC Australia's banks have been able to borrow at better rates thanks to the government's liquidity backstop, while also lending out more than $1 trillion at super profitable returns with bad debts at record lows.
In a sign of the banks' campaigns against the tax increasing, both banks also wrote to their hundreds of thousands of shareholders protesting against the levy, with CBA taking the unusual step of holding "town hall" meetings with shareholders over the tax.
For a full year, the cost will be $370 million or $260 million after tax.
Separately, Commonwealth Bank of Australia, the nation's biggest bank, said it expects the levy will cost it A$220 million after tax a year.
And that means the tax will strip 8 cents a share, or about 4.3% of dividends, based on Westpac's 2016 full year dividends of 188 cents.
Meanwhile, Senator Cormann also called on Labor to rethink its opposition to an across-the-board increase to the Medicare levy to fully fund the National Disability INsurance Scheme.
Westpac issued a statement saying the tax, if passed on the shareholders, will cost about 8c per share.