The decision, 11 days after the Budget was handed down, came after a party room meeting.
Amendments backed by the Nick Xenophon Team’s John Darley will be put to parliament this week to scrap the tax.
The tax won’t go through because the Liberals will have the numbers in the Upper House with several crossbenchers indicating their opposition to the state tax on Australia’s five biggest banks.
The levy contained in the Budget aimed to earn the State Government $370 million in extra revenue over four years. It was modelled on the Federal government’s contentious $6.2 billion levy on the major banks.
“Jay Weatherill’s toxic new tax is a desperate move from a tired and arrogant government,” Opposition leader Steven Marshall told reporters after the meeting.
“If it is introduced Jay Weatherill’s toxic new tax will be paid by South Australians who are already struggling with the highest unemployment in the nation, crushing electricity bills and Labor’s massive ESL tax.
“The Weatherill Labor Government’s latest tax grab will put a wrecking ball through the struggling South Australian economy by killing off jobs and investment.”
South Australian tweeted its response: “It is now clear, a vote for the SA Liberals is a vote for the big banks, their big profits and $370m less for South Australians.”