Show download pdf controls
  • Changes to company tax rates

    Company tax rates apply to:

    • companies
    • corporate unit trusts
    • public trading trusts.

    The full company tax rate is 30% and applies to all companies that are not eligible for the lower company tax rate. Eligibility for the lower company tax rate depends on whether you are a:

    From the 2016–17 income year, the company tax rate has also changed slightly for:

    • not-for-profit companies
    • retirement savings account providers
    • pooled development funds.

    For 2014–15 and prior income years, the company tax rate is 30%.

    Lodging your 2017 company tax return

    When lodging your 2017 company tax return:

    • if you’re a small business, use the lower 27.5% rate
    • if your turnover is $10 million or more, use the 30% rate.

    Find out about:

    See also:

    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:

    • has an aggregated turnover less than the turnover threshold – which is $25 million for the 2017–18 income year, and
    • is carrying on a business.

    For more information about what it means for a company to be carrying on a business, see Draft Taxation Ruling 2017/D7 Income tax: when does a company carry on a business within the meaning of section 23AA of the Income Tax Rates Act 1986?

    Future year company tax rates

    The lower company tax rate will apply to base rate entities with a turnover less than $50 million in the 2018–19 income year. The rate will then reduce to 25% by the 2026–27 income year.

    Table 1: Progressive changes to the company tax rate

    Income year

    Turnover threshold

    Tax rate for base rate entities under the threshold

    Tax rate for all other companies

    2017–18

    $25m

    27.5%

    30.0%

    2018–19 to 2023–24

    $50m

    27.5%

    30.0%

    2024–25

    $50m

    27.0%

    30.0%

    2025–26

    $50m

    26.0%

    30.0%

    2026–27

    $50m

    25.0%

    30.0%

    Proposed law changes

    Bills were tabled on:

    • 18 October 2017, proposing to change the definition of a base rate entity from the 2017–18 income year. Under the proposed law, the carrying on a business test will be replaced with an 80% passive income test
    • 11 May 2017, proposing to gradually extend the lower company tax rate to all companies.

    Lodging your 2018 company tax return early

    Use the existing law if you need to frank your 2017–18 distributions or lodge your 2018 company tax return early. If the proposed changes come into effect, you may need to amend your company tax return or distribution statements.

    For more information about these proposed changes, see Reducing the corporate tax rate.

    See also:

    Small business company tax rate

    For the 2016–17 income year, the lower company tax rate is 27.5%. This lower rate must be applied by small businesses that:

    • have an aggregated turnover of less than $10 million, and
    • are carrying on a business.

    For the 2015–16 income year, the lower company tax rate was 28.5% for small businesses with an aggregated turnover less than $2 million.

    See also:

    Not-for-profit companies

    If you are a not-for-profit company, you don't pay tax on the first $416 of your taxable income. Tax is then shaded in at a rate of 55% of the excess over $416 until the tax on your taxable income effectively equals the company tax rate. You are then taxed at the company tax rate.

    As the lower company tax rate is 27.5%, the shade in limit for not-for-profit companies has been reduced to $832 if they are:

    • base rate entities from the 2017–18 income year
    • small businesses for the 2016–17 income year.

    Table 1: Tax rates for the 2016–17 and 2017–18 income years for not-for-profit companies eligible for the lower company tax rate

    Taxable income

    Tax on taxable income

    $0–$416

    Nil

    $417–$832

    55%

    $833 and above

    27.5%

    See also:

    Maximum franking credits

    To work out the company tax rate you use when franking your distributions you need to assume the aggregated turnover will be the same as the previous income year.

    For the 2017–18 income year, your company tax rate will be 27.5% if either:

    • the aggregated turnover is less than $25 million, and you are carrying on a business
    • this is the first year you are in business.

    Otherwise, the company tax rate you will use when franking your distributions will be 30%.

    2016–17 distributions issued using incorrect rate

    If you are a small business and have already issued your 2016–17 distributions based on the 30% company tax rate, you need to notify your members of the correct dividend and franking credit amounts based on the 27.5% company tax rate.

    You can do this by sending a letter or email to your members, or a revised distribution statement. You also need to ensure the correct amounts are reflected in your franking account. For more information about this, see PCG 2017/D7 Enterprise Tax Plan: Small business over-franking in 2016–17 income year because of tax rate change.

    Previous years

    For the 2015–16 and previous income years, the maximum franking credit that can be allocated to a frankable distribution for all companies was 30%. This included small businesses, even though their company tax rate was 28.5%.

    See also:

    Last modified: 12 Dec 2017QC 54063