Australia is in a fortunate economic position and this has enabled Commonwealth Bank, Westpac, NAB and ANZ to deliver dividends, but bankers on Thursday explained that not all dividends go to shareholders.

Steven Münchenberg, Chief Executive of the Australian Bankers’ Association (ABA), said the concept that shareholders receive all the profit is incorrect.

“What’s interesting to understand is ‘where do all the dividends go’ because the perception is that banks distribute all their profit to shareholders. In fact, shareholders only receive about half of all bank profit,” he said.

Mr Münchenberg went on to say that the tax office collects around 25 per cent of banks’ profits.

“Indeed banks contribute more corporate tax than any other industry in Australia,” he said.

“In the last five years, banks have paid $33 billion in tax, plus an addition $3 billion for the Government’s bank funding guarantee. The remainder around 24% is re-invested back into the business.

According to ABA, those who receive dividends - bank shareholders - are often negatively characterised – the inference is that they are wealthy and the returns are adding to their bank accounts.

Yet, the reality is quite different. The great majority of bank shares, including that of Commonwealth Bank, Westpac, NAB and ANZ, are held by households either directly or indirectly through their superannuation funds and retirement savings.

“Bank shares are a mainstay of super fund investment given the stability of earnings and relatively high dividends. These returns help people earn income for their retirement.”

“Banks also have to make revenue to pay their depositors interest, especially as savings have hit record highs. Savers, including bond holders, get the biggest slice of the income pie - 61 cents in every dollar of bank income went to pay depositors,” Mr Münchenberg concluded.