Macquarie Group says the federal government’s new levy will effectively mean its bank business will be paying 41% tax, up from 34%.
And Macquarie estimates the annualised cost of the new tax at $66 million pre-tax based on earnings for the full year to March 2017.
Chairman Peter Warne, in an address to the group’s AGM, says the levy will have a disproportionately high impact on Macquarie Bank compared to the big four banks.
This is because the bank’s business mix is more weighted to wholesale and international business.
The bank’s Australian operations represent about one third of Macquarie Bank’s earnings.
“Given the relatively small size of our Australian banking business we were surprised by our inclusion in the group to pay this levy,” says Warne.
“We have also expressed our concern to the government given the benefit we bring to domestic competition and innovation, the role we play in bringing offshore income into the Australian economy, and the potential for unintended consequences resulting from the levy.
“We would like to reassure you that we will continue to review our business mix and location to ensure all our businesses remain profitable and internationally competitive, noting that our international competitors are not subject to this tax.”
The new bank levy, a six-basis point charge on the big banks’ liabilities to raise $6.2 billion over four years to help repair a hole in the federal government’s revenue, was announced in the May budget.
Macquarie Group says its full year results are on track with profit expected to match last year’s $2.217 billion record.
CEO Nicholas Moore told the AGM that performance was in line with expectations, with the contribution from the first quarter of the 2018 financial year up on the same three months in 2017 and down on a strong prior quarter.
“Macquarie remains well positioned to deliver superior performance in the medium-term due to its deep expertise in major markets, strength in diversity and ability to adapt its portfolio mix to changing market conditions, the ongoing benefits of continued cost initiatives, a strong and conservative balance sheet and a proven risk management framework and culture,” he told shareholders.