Coalition would lift bank taxes

Taxes on banks would rise if there is a change in government at the general election next month.

Budget "savings" measures outlined by Joe Hockey, the shadow treasurer, yesterday include "discontinuing the phasing down of interest withholding tax on financial institutions", a measure that would cost the industry A$400 million.

Cutting or removing IWT has long been on the wish list of the industry. The tax has been shaved, in stages, over recent years.

In November 2011, the Labor Government outlined plans to phase down the rate of IWT for foreign bank branches that borrow from their overseas head offices from five per cent to 2.5 per cent. The planned cut in the tax rate was deferred to July 2014, rather than July 2013, as was announced in the 2010 budget.

Labor's policy calls for the tax to be eliminated for foreign bank branches from July 2015.

For other financial institutions, the rate of IWT will fall from 10 per cent to 7.5 per cent from July 2014, and to five per cent from July 2015, under existing policy.

Other Coalition policy measures of interest to banks may affect the credit of business customers. It would reduce the instant asset write-off threshold and remove accelerated depreciation for motor vehicles.