Bank account debits tax


Bank account debits tax was an Australian bank transaction tax levied on customer withdrawals from bank accounts with a cheque facility.
The tax was introduced by the federal government in 1982. The power to levy the tax was transferred to the states in 1990, except for Norfolk Island which did not charge it. The tax was abolished by the states on dates between 1 July 2002 and 1 July 2005 as part of the package of reforms for the introduction of the goods and services tax. The financial institutions duty was also abolished as part of this package.
The tax was based on the amount withdrawn, and varied by state. The final rates were per the following table.
SA, Vic,
WAless than $1nilnil$1 to less than $100$0.15$0.15$100 to less than $500$0.35$0.70$500 to less than $5,000$0.75$1.50$5,000 to less than $10,000$1.50$3.00$10,000 or more$2.00$4.00
The tax was levied according to the state where the bank account was domiciled, not where the account holder lived. A total of about $1 billion per year was being collected near the end of its full operation in 2001.
Since the tax applied only to cheque accounts, bank customers could choose not to have a cheque facility to avoid the tax, or could keep a separate cheque account used only when needing to write a cheque.

Bank errors

On 11 May 2005, National Australia Bank announced it had incorrectly collected bank account debits tax totalling some $10 million from 140,000 bank accounts. The bank's announcement included plans to reimburse customers for the $10 million incorrectly collected and a further $4 million in interest owed. However, since the issue may have dated back to the 31 December 1982 introduction of the tax, there were insufficient records to identify all affected customers.

Legislation