Changes to company tax rates

Base rate entity company tax rate

From the 2017–18 income year, companies that are base rate entities must apply the lower 27.5% company tax rate.

A base rate entity is a company that both:

• has an aggregated turnover less than the aggregated turnover threshold – which is $25 million for the 2017–18 income year

• 80% or less of their assessable income is base rate entity passive income – this replaces the requirement to be carrying on a business.

Base rate entity passive income is:

• corporate distributions and franking credits on these distributions

• royalties and rent

• interest income (some exceptions apply)

• gains on qualifying securities

• a net capital gain

• an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.

Future year company tax rates

The lower company tax rate applies to base rate entities with an aggregated turnover less than $50 million from the 2018–19 income year. The rate will then reduce to 25% by the 2021–22 income year.

- Source ATO