The federal government has rejected a call by Labor and the Nick Xenophon Team to subject foreign banks to the new bank tax, arguing it would defeat the goal of the levy which was to foster greater competition.
The bank says calculations of the announced 0.06% Government levy are based on its impacted liabilities of $615 billion as at 31 March 2017.
It said the Commonwealth Bank, Westpac, NAB, and ANZ could assume "timely financial support" from the Australian government in the event of a sharp correction, giving them an advantage.
In question time, the Turnbull government confirmed the bank levy would be a tax-deductible expense for the big five banks affected by it, and that the estimated $6.2 billion revenue to be raised was a net figure.
"No company can simply "absorb" a new tax", Westpac stated in an outright rejection of a key Government argument.
"Westpac has strongly objected to the levy on the grounds that it is an inefficient tax that targets just five companies; it places the major banks at a competitive disadvantage relative to global peers; and it is a tax on growth because as lending and investment increases the cost of the levy also rises", Westpac said.
The Prime Minister said the levy would apply to foreign banks if they reached the $100 billion liability threshold.More news: Google poised to roll out arsenal of services, gadgets
However, it would also result in a new cost in the second half of 2017, of about $65 million after tax.
This included the likes of AMP, Bank of Queensland and Bendigo and Adelaide Bank.
"The exact cost will depend on the final form of the new legislation passed and the composition of Westpac's liabilities", it says. That translates to an annualized cost of AUD260 million.
Westpac also affirmed it may pass on the levy to its customers, shareholders, suppliers, staff "or some combination of all four".
Westpac paid a total $1.88 in dividends per share while making a $7.8 billion full-year profit in 2015/16, and said the $260 million charge works out as eight cents per security.
Meanwhile, Senator Cormann also called on Labor to rethink its opposition to an across-the-board increase to the Medicare levy to fully fund the National Disability INsurance Scheme.
Until then, Westpac is advocating two amendments to the levy - firstly, "the new tax should include foreign banks to ensure Westpac is not competitively disadvantaged".