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  • Lower company tax rate: eligibility changes now law

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

    To be considered a base rate entity, a company must have both:

    • a turnover less than $25 million in 2017–18 ($50 million from 2018–19)
    • 80% or less of their assessable income as base rate entity passive income; examples include interest, dividends or rent (this replaces the 'carrying on a business' test).

    If a company is not a base rate entity then the general company tax rate of 30% will apply.

    If you have already lodged a 2018 company tax return using the incorrect rate you will need to make an amendment.

    Note: Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, which sought to gradually extend the lower company tax rate to all companies, is not proceeding.

    Franking credits

    When working out the rate to use for 2017–18 franking distributions, you should use the company's previous year's turnover, assessable income and base rate entity passive income.

    If your company issued distribution statements using the incorrect rate, you should amend your annual dividend reports and tell your shareholders of the correct dividend and franking credit amounts as soon as possible. This can be done by letter, email or by issuing an amended distribution statement with the correct amounts.

    See also:

    Last modified: 12 Sep 2018QC 56781