Banks prepare to fight IRD over taxation bill

Westpac and ASB have received revised 2002 tax assessments related to their use of so-called "structured finance" transactions.

The four big Australian-owned banks are facing contingent liabilities of more than $2 billion from their use of the deals between 1999 and 2004 under which they borrowed money from their parent and claimed an interest deduction, as a result producing little or no taxable income in New Zealand.

Westpac said it had received a revised 2002 tax assessment of $110 million, which rises to $155 million including interest. ASB said it had received one of $21.7 million including interest. BNZ too has received a revised 2002 assessment. However ANZ National has yet to confirm whether it has received one.

The amended assessments follow notices of proposed adjustments sent by the Inland Revenue Department to the banks totalling well over $1 billion over their use of the transactions between 1999 and 2004.

The banks said interest due on the contested amounts had pushed their combined potential liability to $2.073 billion by December 2006.

All four banks have indicated they intend to contest any bid by the IRD to claim the money.