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Amended Tax Assessments via New Zealand

Melbourne, 1 April 2004

National Australia Bank Group Receives Amended Tax Assessments via New Zealand Subsidiaries

Certain subsidiaries of Bank of New Zealand, a wholly-owned subsidiary of National Australia Bank, have received amended tax assessments from the New Zealand Inland Revenue Department (IRD) for the 1998 and 1999 years.

The amended assessments relate to three structured finance transactions that were undertaken by subsidiaries of Bank of New Zealand over this period. The amended assessments are for income tax of approximately NZ$36 million and interest of NZ$21 million.

The possible application of penalties has yet to be considered by the IRD. In addition the IRD has also issued amended assessments based on an alternative approach to re-assessing the transactions. This alternative approach results in a lower additional tax liability. The amended assessments were issued on the day before the statutory time limited expired.

Bank of New Zealand believes that IRD has calculated the assessments for 1998 and 1999 at unnecessarily high levels.

The IRD has not yet issued amended assessments for the transactions for income years after 1999. Notwithstanding that, based on the assessments received to date, the maximum sum of primary tax which IRD might claim from Bank of New Zealand for the years after 1999 is approximately NZ$212 million. Interest would be charged in the event that the IRD were to issue amended assessments for this period. Penalties may also be considered by the IRD.

Bank of New Zealand has obtained legal opinions that confirm that the transactions complied with New Zealand tax law. The transactions are similar to transactions undertaken by other New Zealand banks.

Bank of New Zealand is confident of its legal position and it will contest the amended assessments. Consequently, Bank of New Zealand does not intend to raise a provision for a potential tax liability. Further, Bank of New Zealand will maintain its existing tax treatment of the transactions.

The IRD has been aware for some time that New Zealand banks, including Bank of New Zealand, were undertaking such transactions. The IRD has acknowledged publicly that it is reviewing structured finance transactions by other New Zealand banks as part of an industry-wide review.


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