House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

General outline and financial impact

Major bank levy

The Major Bank Levy Bill 2017 (Major Bank Levy Bill) will introduce a levy on authorised deposit-taking institutions (ADIs) with total liabilities of greater than $100 billion. The levy is imposed at a rate of 0.015 per cent on certain liabilities of the ADI that are reported to the Australian Prudential Regulation Authority (APRA) on a quarterly basis under a reporting standard.

Schedule 1 to the Treasury Laws Amendment (Major Bank Levy) Bill 2017 (the Treasury Laws Amendment Bill) amends the Australian Prudential Regulation Authority Act 1998 (APRA Act), the Financial Sector (Collection of Data) Act 2001 (Collection of Data Act), the Income Tax Assessment Act 1997 (ITAA 1997) and the Taxation Administration Act 1953 (TAA 1953) to specify certain administrative features relating to the major bank levy, including the requirement that the levy is payable to the Commissioner of Taxation (Commissioner) quarterly.

Date of effect: 1 July 2017

Proposal announced: The measure was announced on 9 May 2017 as part of the 2017-18 Budget.

Financial impact: The measure has these revenue implications:

These figures are the implications for the fiscal balance, totalling $6.2 billion over those years. The implications for the underlying cash balance are $5.5 billion over the same period.

Human rights implications: These Bills do not raise any human rights issue. See Statement of Compatibility with Human Rights - paragraphs 1.83 to 1.87.

Compliance cost impact: Low.

Summary of regulation impact statement

Regulation impact on business

Impact: Total compliance costs of $15 million, or $1.5 million per annum, across the affected banks over a ten year period.

Main points:

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APRA will create a new reporting form to collect the data required to calculate the major bank levy.

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While this will impose some additional compliance costs, banks already collect much of the data required for existing APRA reporting forms and other purposes.

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Any risks to financial market disruption arising from the major bank levy have been minimised by its design.

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The major bank levy should have a negligible impact on the real economy.