Other trading banks could now also be compelled to pay back taxes after a win by the Inland Revenue Department against the BNZ in a $654 million tax case.
The High Court in Wellington has found that the BNZ used structured finance transactions to avoid paying tax between 1998 and 2005.
Several other banks are involved in similar legal action, and the ruling could set a precedent.
After a 13 week trial, Justice Wild issued a ruling on Thursday that the bank used six offshore transations from 1998 -2005 to avoid paying $416 million. It's also liable for interest of $238 million.
Justice Wild said the transactions had no commercial rationale, logic or purpose.
Inland Revenue is seeking $2 billion in unpaid tax and interest from the four main banks, arguing they used these transactions between 1998 - 2002. All are Australian-owned.
The department says it's pleased with the ruling, but tax experts say it's not the end of the matter.
IRD is currently in court with Westpac in the High Court in Auckland. It is understood the level of contingent liability for Westpac is $850 million.
ANZ National Bank's is $554 million and ASB Bank's contingent liability is $291 million.
BNZ chief executive Andrew Thorburn says the bank is likely to appeal.
Appeal prospects
Chapman Tripp tax lawyer Casey Plunket says the bank may win an appeal because the tax law in question can be contentious.
He says there's a very good chance the next judges will rule differently.
Mr Plunket says it's also worth appealing simply because of the amount of money at stake.
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