Staggered cuts to the company tax rate
The company tax rate for small businesses will be reduced to 27.5% for the 2016/17 and later income years. The new legislation will also increase access to the reduced company tax rate by progressively including more companies over the next three income years. Companies with aggregated turnover of $50m or less will have the reduced rate from 2018/19. Aggregated turnover is defined as including all connected entities and affiliates, reduced by any intra-company transactions.
Further legislation has been introduced in October 2017 relating to these corporate tax cuts. Pending approval, from the 2017/18 income year these tax cuts will apply to companies who are considered a base rate entity. A base rate entity is a company who has less than 80% of assessable income from passive sources.
Prior to this rule coming into effect, small companies which have the intention of making a profit may be entitled to the lower tax rate.
Ultimately, the company tax rate for entities below $50m in turnover will be reduced to 25% starting from the 2026/27 income year.
Source: Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016; Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017