The federal government has rejected a call by Labor and the Nick Xenophon Team to subject foreign banks to the new bank tax, arguing it would defeat the objective of the levy which was to foster greater competition.
"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".
In question time, the Turnbull government confirmed the bank levy would be a tax-deductible expense for the big five banks affected by it, and that the estimated $6.2 billion revenue to be raised was a net figure.
"Consideration is being given to how we will manage this significant impost on the bank", Westpac says.
Banks have opposed the tax announced in the federal budget on May 8, with Commonwealth Bank of Australia (CBA), Westpac Banking Corp, National Australia Bank Ltd (NAB) and Australia and New Zealand Banking Group Ltd (ANZ) now putting a number on costs they say will be borne by customers and shareholders.
The Prime Minister said the levy would apply to foreign banks if they reached the $100 billion liability threshold. You know, I know and the government knows that a tax can not be "absorbed". Nevertheless, given information received to date, we are able to provide preliminary estimates of the cost of the Levy for Westpac.
This included the likes of AMP, Bank of Queensland and Bendigo and Adelaide Bank.
The bank in February posted a record half year cash profit of $4.91 billion.
"The exact cost will depend on the final form of the new legislation passed and the composition of Westpac's liabilities", the bank noted in its statement to the ASX. In a letter to shareholders, the Sydney-based lender also highlighted concerns about plans in the budget to give regulators a greater say over executive pay.
Senator Whish-Wilson questined how the government expected to raise $1.5 billion a year if Westpac was paying only $260 million.
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.
The levy will impact Westpac's 2017 financial results for the year ended September 30 with a part year cost of $65 million after tax.
Worldwide rivals would not be subject to the levy, although HSBC is subject to the equivalent United Kingdom scheme.