Tony Abbott and Joe Hockey announce scrapping of bank deposit tax

DENYING reports that the Treasurer’s job is on the line, the Prime Minister has announced the axing of the $1.5 billion bank deposit tax.

Abbott scraps bank deposit tax

THE government will be forced to find an extra $1.5 billion in revenue after scrapping the bank deposit tax.

Prime Minister Tony Abbott and Treasurer Joe Hockey made the announcement today to drop the tax, following a meeting of Cabinet in Canberra.

The axed tax was first proposed by Labor in 2013 but was still written into Mr Hockey’s budget this year.

It was estimated to bring in $1.5 billion in revenue over the forward estimates.

But the government will now need to find the extra money, potentially threatening the Coalition’s push to get the nation’s finances back in the black.

“This government is committed to repairing the budget while removing unnecessary and harmful taxes,” a spokeswoman for the Treasurer said when asked if the dropping of the tax would threaten the budget bottom line.

“We will address budget issues as part of the normal budget process.”

Making the announcement, the Prime Minister stood by his Treasurer in a sign of strength following reports the MP’s job was on the line.

“The bank deposit tax that the Labor Party announced and built into the Budget will not go ahead,” Mr Abbott said.

“This is very good news for the people of Australia. That’s a $1.5 billion hit on the people of Australia that is not going ahead thanks to this ... government.”

Mr Abbott said he was proud to be making the announcement alongside his “friend” Joe Hockey.

“I’m delighted to be here with my friend and colleague, the Treasurer,” Mr Abbott said.

“The Treasurer has done an outstanding job, an absolutely outstanding job. A critical part of managing our economy is keeping taxes low. It’s removing bad taxes. It’s not proceeding with unnecessary taxes. That’s exactly what Joe Hockey has done to his credit.”

Mr Hockey said now was not the time for this tax.

He said the policy was left in his budget in May, while consultation was continuing with financial institutions.

“This has been a work in progress, we have consulted widely. But ultimately it comes down to the fact that this was a bad tax,” Mr Hockey said.

“It was a tax on savings.

“It was a tax that was going to impact everyone with a bank account.”

Labor initially announced the tax in August 2013.

It was built into the federal Budget but never legislated.

The staged press conference in the Prime Minister’s Courtyard came after reports Mr Abbott was being urged to dump Mr Hockey as Treasurer should the Liberal Party lose the Canning by-election on September 19.

Mr Hockey and the Prime Minister, along with other cabinet ministers, denied the reports saying they were “speculative gossip”.

Mr Hockey said the story was just coming from a few “fringe whingers” within the cabinet.

In a statement from the Commonwealth Bank, it said it welcomes the Government’s decision to maintain current arrangements for funding of the Financial Claims Scheme, in line with recommendations of the Financial System Inquiry.

Commonwealth Bank Chief Executive Ian Narev said: “Today’s policy decision strikes the right balance between maintaining confidence and supporting economic growth. The Australian banking system is strong and resilient without the need to impose additional costs on savers and investors.

“We congratulate the Government for its constructive consultation on this important policy decision, as demonstrated throughout the FSI process.”