Why

The South Australian Government announced a new tax on major banks as part of its 2017/2018 State Budget (announced on Thursday 22 June).

The new bank tax was announced as a revenue raising measure for the South Australian Government and is due to come into effect from 1 July 2017.

It will cost the banks about $370 million over the next four years – money that should be supporting the local economy and helping to create jobs.

What is the SA bank tax?

The South Australian Government announced a new tax on major banks as part of its 2017/2018 State Budget (announced on Thursday 22 June).

The new bank tax was announced as a revenue raising measure for the South Australian Government and is due to come into effect from 1 July 2017.

It will cost the banks about $370 million over the next four years – money that should be supporting the local economy and helping to create jobs.

Why is it bad policy?

A new tax like this will be a tax on everyone. It will discourage investment, it will put a handbrake on growth, and it will have an impact on jobs.

Recent polling by Galaxy shows that most South Australians believe the tax will hurt their state and don’t want it passed into law by the S.A. Parliament.

There is no rationale for the policy other than it will raise revenue to help the Government balance its budget – this is poor economic management.

The arguments put forward to justify a recent similar Federal tax do not apply in this case.

It is bad for bank customers, shareholders and employees – ordinary Australians. It is bad for business, investment, jobs and growth in South Australia – everybody in South Australia. It is bad for the country – it impacts on offshore investor confidence and appetite to investing in Australia.

How does it affect South Australia?

This proposed new South Australia bank tax would make South Australia the only state to have a separate tax on banks – this makes South Australia a risky place to do business. It will impact on the competitiveness of the state and will harm consumer and business confidence.

Instead of a new tax, the banking industry believes South Australia needs policies to attract investment, drive growth and create jobs, not a tax that will put a handbrake on all three.

How does this affect business owners?

South Australian business are angry and concerned about this tax.

A large number of business and industry groups that represent almost every sector of the economy and employ more than 350,000 South Australian workers have already publicly opposed the new tax because it will be bad for business and bad for their employees.

Business need certainty to grow, invest in new projects and to employ more staff – particularly in a state with one of the country’s highest unemployment rates of 6.9 percent.

How does this affect bank customers, employees and shareholders?

There's no such thing as absorbing a tax; South Australian bank customers, shareholders or employees will ultimately be impacted.

A new Galaxy poll shows that 80% of voters reject the idea that a new tax can be absorbed and not get passed on somehow.

How many people in South Australia will be affected?

All South Australians will be impacted by this tax because it will impact on investment, growth and jobs.

Banks in South Australia employ 6,500 people.

There are 145,000 mum and dad shareholders of banks in South Australia. Many more South Australians own shares in banks through their superannuation funds.

On top of paying tax, and hundreds of millions in wages and salaries and to local suppliers, banks pay out about 80% of their profits as dividends to their shareholders including the 145,000 bank shareholders in South Australia.

Nearly all retirees with a superannuation pension relies on banks’ dividends as part of their retirement income.

Is the S.A. bank tax the same as the Federal Bank Tax?

No.

Banks are subject to company tax, which is administered by the Federal Government. Banks, like other consumers of goods and services, also pay GST.

In addition, in May 2017, the Federal Government announced an additional tax for five major banks, applying nationally.

The proposed new South Australian bank tax is a tax that comes on top of company tax and the national bank levy, meaning it is the third tax on banks. The S.A. tax would be the only one of its kind in Australia where a state is proposing to tax one section of one industry.

State governments are not responsible for banking policy.

This proposal is a step back in time. When the GST was introduced in 2000 imposing a new tax on Australians purchasing goods and services, a range of state taxes were eliminated to simplify the tax system and make it fairer for consumers. Some state taxes relating to financial institutions were removed at this time because they were bad policy. The S.A. bank levy reverses that progress.

Don't the banks make super profits? Shouldn't they pay their fair share of tax?

Banks are big business and we all need them to be successful so they can lend for homes and small business and pay interest on our deposit accounts. 80% of all bank profits go directly to shareholders and 75% of these are Australian. The rest goes back into building better banking services for customers - such as new technology to improve convenience and speed of online and mobile banking.

Banks paid $14 billion in taxes to governments last year.

Banks are the biggest taxpayers in Australia and pay more than the rest of Australia’s 200 biggest companies combined.

Banks pay the full 30% company tax rate and do not aggressively minimise tax like some foreign companies operating in Australia. In fact, banks make the highest tax contribution of any industry in Australia. This contribution helps governments at all levels to fund essential public services such as hospitals, schools, roads as well as income support for those in need.

Additionally, in 2016, banks paid $25 billion in wages and salaries to staff, $26 billion in dividends to shareholders – many of whom are mums and dads – and $66 billion in interest on bank deposits and bonds.

For more information, a report on tax paid by banks can be found on the ABA website.

Can’t the banks absorb the tax?

If the proposed South Australia bank tax becomes law, banks will need to make individual decisions about how they will deal with this new cost of doing business.

There's no such thing as absorbing a tax. Customers, bank shareholders, employees or suppliers will ultimately be impacted.

Why would the S.A. bank tax mean fewer jobs for South Australia?

Lower business confidence means business will be nervous to expand their business and grow, which will impact on the number of jobs that can be created and supported in South Australia.

This tax discourages business from setting up shop in South Australia. It sends a poor signal that if you are successful, you may be next in line for a new tax by the South Australian Government. It makes South Australia a risky place to do business and hire.

The South Australia bank tax is bad policy and poor economic management.

South Australia has already lost the car industry and Coca-Cola. It can't afford to risk a further handbrake on investment, growth and jobs.

Other states have confirmed they would not be following South Australia’s lead – because they know it will be bad for their economies and job creation in their states.

Banks and SA

SA banks paid $1.5 billion in dividends last year.

SA banks have 146,500 direct shareholders and hundreds of thousands more through superannuation.

SA banks approved $10 billion in loans for homes and $13 billion in loans for SA business last year.

Banks are Australia’s largest tax payers – the industry paid more than $14 billion in 2016.

Australia’s banks pay tax at the full corporate rate of 30%.

80% of bank profits are returned to shareholders.

Financial and insurance services is the second biggest industry in South Australia.

Banks directly employ 6,500 people in South Australia.

There are 300 bank branches and 900,000 customers who use the major banks as their main financial institution.