The Turnbull government's proposed levy on Australia's five biggest banks has cleared federal parliament despite concerns from within coalition ranks.
The levy, announced in the May budget, passed the upper house with the support of Labor and the Greens late on Monday night.
It will apply to ANZ, Westpac, National Australia Bank, Commonwealth and Macquarie and is expected to raise $6.2 billion, including $1.6 billion in the first year.
Veteran coalition senator Ian Macdonald said he "despaired" as a Liberal that the government was taxing different companies differently, insisting it was inappropriate.
"I'm uncomfortable about that and I know that many in my party are," he told parliament.
He was "distressed" that the government did not amend the legislation to adopt the recommendations of a government-dominated Senate committee, labelling it "incredible".
The committee report, tabled in parliament on Monday, agreed with a request by the big banks for a review of the levy in two years.
The legislation should also be amended to allow the treasurer to suspend the levy in cases where banks are in extreme financial hardship, the report said.
As well, Treasury should better explain why foreign banks are excluded and Macquarie Bank is included as one of the five "major banks".
Crossbench senator Nick Xenophon tried but failed to amend the legislation to ensure the levy would apply to foreign banks with significant assets such as HSBC or BNP Paribas, arguing the levy unfairly disadvantaged Australian banks.
Finance Minister Mathias Cormann said the levy would apply to foreign banks if they were ever to meet the threshold but at present, none fit the "major bank" category.
One Nation's Brian Burston described the levy as a "lazy, ugly, cheap solution" that would hit shareholders and superannuation savings without fixing any of the real problems within the banking sector.
"It's as if you call the cops to deal with a thug demanding protection money and instead of arresting the thug, the policeman just puts out his hand to take his cut," he told parliament.