Westpac CEO Gail Kelly calls on Government to allow tax breaks on interest earned from savings accounts

Westpac Banking CEO Gail Kelly has said any measure to reduce tax on the interest Australians earn from savings accounts is welcome.

“The Government has made a start and we’re appreciative of that,” Kelly told LeadingCompany when asked if the Federal Government’s tax on savings account interest may not be encouraging the growing of a vital funding source that could lead to lower mortgage rates.

Kelly said improved access to cheaper funding sources, through incentives for the superannuation industry to invest more in cash and fixed interest, could help banks pass on more rate cuts.

“We need to think about a range of issues around the structure of deposits in Australia. We think more could be done there,” Kelly said.

The Henry Tax Review suggested a 40% income discount apply to earnings from deposits.

The Government has promised a 50% tax discount on interest income up to only $1,000, though the measure is not scheduled to be introduced until July next year.

“Absolutely, there’s no doubt if funding costs were reduced, there’s no doubt at all we would be able to pass on those price benefits,” she said.

Westpac receives approximately 64% of its funding for loans from deposit accounts, and Kelly said Westpac has captured about 21% of the Australian pool of savings deposits.

The total private deposit pool in Australian banks is about $1.2 trillion as of March 31, according to the RBA.

Westpac has cut its key mortgage rate by 37 basis points following recent moves by its rivals.