South Australia to Introduce a Supplementary Major Banks Levy

Thursday 31 August 2017 @ 10.01 a.m. | Corporate & Regulatory | Taxation | Trade & Commerce

The South Australian (SA) Treasurer Mr Koutsantonis has proposed the introduction of a "state based major bank levy"  mirroring the measure introduced by the Commonwealth Government in its 2017 budget (see Major Bank Levy Bills Introduced). The levy forms part of the Budget Measures Bill 2017, a Bill which has passed the SA Legislative Assembly with amendments on 10 August 2017 and is as yet to be debated in the SA Legislative Council.

About the Proposed Levy

In his second reading speech, the SA Treasurer stated that:

"As part of the Budget's revenue initiatives, the [SA] Government will introduce a major bank levy from 1 July 2017."

The proposed levy is to apply to all "authorised deposit-taking institutions" (ADIs) that offer services in SA and are liable for the Commonwealth Government major bank levy.

In describing how the levy would work the SA Treasurer indicated that it would "supplement and leverage off" the Commonwealth major bank levy. The amount payable under the State levy will be 0.015 percent of SA's estimated share of the total value of bank liabilities subject to the Commonwealth major bank levy at the end of each quarter.

The SA Treasurer noted that under the Commonwealth legislation SA's estimated share of relevant bank liabilities will be determined as ". . . South Australia's gross state product share of national gross domestic product" (currently around six percent).

Payment and Reporting

Reporting and payment time frames will be aligned with the time frames required for the Commonwealth Government's major bank levy.

The SA Treasurer indicated that liabilities under the levy for the first quarter will be based on the total value of relevant bank liabilities as at 30 September 2017, but the first levy payment will not be due until 21 March 2018.

Prospect of Law Passing

It has been reported that the bank levy is estimated to raise $370 million over the next four years. The proposed law passed in the Assembly with the support of former Liberal MP Duncan McFetridge and is likely to face a serious High Court challenge if it does eventually become law according to the Australian Bankers' Association (ABA).

Even before the prospect of a legal challenge the proposed law needs to pass through the SA Council where it is reported that  several crossbenchers have indicated they will oppose the proposed levy.

Reaction and Comment

The Chief Executive of the ABA Anna Bligh is reported as saying that: 

". . . the banks were prepared to take the matter to the High Court if the tax came into effect in South Australia. . . . After speaking with legal advisers, the major banks have now resolved that should this pass the South Australian Parliament and be implemented, then it will be subject to a constitutional challenge in the High Court of Australia."

The ABA has also indicated that the major banks would also make similar challenges to other states or territories who chose to adopt the same measure.

The SA Treasurer is reported as indicating he is not surprised by the ABA threats of legal action, and that in his view the major bank levy was legally sound:

"The reason they're puffing up their chest now is that they're worried about this tax being introduced in other jurisdictions, . . . They're trying to frighten the other states into thinking this is unconstitutional."

That other states are considering such a levy is not unfounded, for example, the West Australian Government, which has indicated it would consider implementing a levy, but not in this year's state budget.

The SA Treasurer is reported as saying the proposed levy would be passed eventually:

"The idea that a government wouldn't be allowed to pass its budget is ridiculous — of course it will pass, . . "

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

Sources:

Budget Measures Bill 2017 (218 of 2017) [SA]  second reading speech and supporting materials as reported in the TimeBase LawOne Service.

Australian Bankers Association threatens High Court legal action over SA bank tax

WA bank tax unlikely in this budget, Treasurer says, as Opposition warns of breaking promises

Major Bank Levy (Revenue SA website)

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