Nick Xenophon backs bank tax - but only if it also applies to foreign banks

And the leader of the Nick Xenophon Team, Senator Nick Xenophon, has also flagged concerns about the government's decision to keep the proposed laws under wraps until they are introduced into the parliament.

But the push from crossbench powerbroker has been rejected by the government, with Finance Minister Mathias Cormann saying the major bank levy was designed to boost the competitiveness of smaller banks, including foreign ones.

Senator Xenophon told the ABC's Insiders program he supported the 0.06 per cent levy, which would apply to Westpac, NAB, Commonwealth Bank, ANZ and Macquarie and is designed to raise $6.2 billion, in principle but suggested the levy should be more broadly applied – and the extra money used to compensate victims of bank fraud.

"I do support the broad principles and one of the main reasons is that this will give a chance for those regional banks, those community banks, to get a leg up to be able to compete more fairly," he said.

"I also think it's important that the foreign-owned banks that have a big presence here in this country also be hit with this levy, because that could raise about $750-800 million over the forward estimates and that itself could fund a last resort compensation scheme for the many tens of thousands of victims of financial mismanagement and fraud in this country."

Senator Xenophon controls three votes in the Senate. Labor, at this stage, has indicated provisional support for the new tax but if that position were to change, the NXT voting bloc would be crucial to the measure being implemented from July 1, as planned.

Senator Cormann said the government was making a deliberate decision to boost the position of smaller foreign and regional banks and called on Labor to follow through on its support for the original proposal.

"The levy has been designed on purpose the way it has been. And the Labor Party on the night of the budget came out to confirm they would support the major bank levy that way we've put it forward," Senator Cormann told ABC radio.

"We're not supporting what Nick Xenophon is putting forward."

Labor has suggested a Senate inquiry into the tax should look at extending the levy to foreign banks, but it has not yet made extending the tax a condition of its support.

"It depends whether the ALP will come along with that. I think that's something that I will sit down and talk to the ALP about, but it makes sense. The big banks are saying, 'Well, if you are going to hit us with this, why aren't you hitting the foreign banks and I think they have a point," Senator Xenophon said.

Treasurer Scott Morrison has defended the decision not to release the bank tax legislation until it is introduced into parliament, arguing it is not unusual. However, it is very rare for exposure draft legislation to not be released.

The draft legislation is due to be entered into parliament in the next fortnight.

Australia's five largest banks are furious at the new tax, the secrecy attached to the legislation and the very short amount of time they were given to respond to the exposure draft.

- with Fergus Hunter