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  • Changes to company tax rates

    There are changes to the company tax rates. The full company tax rate is 30% and the lower company tax rate is 27.5%. This page shows when to apply the lower rate and how to work out franking credits.

    Company tax rates apply to:

    • companies
    • corporate unit trusts
    • public trading trusts.

    The full company tax rate of 30% 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:

    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 both:

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

    Aggregated 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.

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

    Lodging your 2018 company tax return early

    If you need to lodge your tax return early, make sure you understand how the law changes apply to you and use the correct tax rate.

    See also:

    Small business entity company tax rate

    You need to be a small business entity to be eligible for the lower company tax rate in the 2015–16 and 2016–17 income years.

    For the 2016–17 income year, the lower company tax rate is 27.5%. This lower rate applies to small businesses that both:

    • have an aggregated turnover of less than $10 million, and
    • are carrying on a business for all or part of the year.

    For the 2015–16 income year, the lower company tax rate was 28.5% for small business entities with an aggregated turnover less than $2 million, and are carrying on a business for all or part of the year.

    From the 2017–18 income year, you need to be a base rate entity, rather than a small business entity to be eligible for the lower tax rate.

    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 business entities for the 2016–17 income year.

    Table 2: 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 rate on taxable income

    $0–$416

    Nil

    $417–$831

    55%

    $832 and above

    27.5%

    See also:

    Maximum franking credits

    From the 2017–18 income year, the maximum franking credit that can be allocated to a frankable distribution is based on a company's corporate tax rate for imputation purposes.

    For the 2017–18 income year, your corporate tax rate for imputation purposes is 27.5% if either:

    • your aggregated turnover in the 2016–17 income year was less than $25 million, and you were carrying on a business
    • this is the first year you are in business.

    Otherwise, your corporate tax rate for imputation purposes is 30%.

    See also:

    Distributions issued using incorrect tax rate

    If you have issued your 2016–17 or 2017–18 distribution statements using an incorrect corporate tax rate for imputation purposes, you should notify your shareholders of the correct dividend and franking credit amounts. You can do this by sending a letter or email to your shareholders, or a revised distribution statement. You also need to ensure the correct amounts are reflected in your franking account.

    See also:

    • 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?
    • PCG 2018/D5 Enterprise Tax Plan: small business company tax rate change: compliance and administrative approaches for the 2015-16, 2016-17 and 2017-18 income years

    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 business entities, even though their company tax rate was 28.5%.

    See also:

    Last modified: 30 Jul 2018QC 54063