Australian covered bond first reveals tax problems

Author: | Published: 22 Nov 2011

Matthew Gilleard

The first Australian covered bonds were issued last week, allowing all Australian banks, credit unions and building societies to access cheaper sources of funding, but there are tax implications, warn advisers.

Despite the positive effects, the introduction of covered bonds will mean tax changes are required; otherwise the taxes incurred could negate the benefits of covered bonds as a source of funding.

The tax implications relate to consolidation, stamp duty and non-resident withholding tax, but should be manageable, say advisers.

Following Swan’s announcement on Wednesday, Commonwealth Bank and ANZ Banking Group have completed covered bond issues. ANZ has raised $1.25 billion (A$1.23 billion) from US debt markets, while National Australia Bank is also expected to complete covered bond issues...