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  • Base rate entities and the lower company tax rate

    We have found that some corporate tax entities in privately owned and wealthy groups and public and international groups are mistakenly claiming to be a Base Rate Entity (BRE) and using a lower company tax rate when they are not entitled to. This may be because a corporate tax entity’s aggregated turnover exceeds the aggregated turnover threshold for a BRE, or they have failed to correctly calculate their base rate entity passive income.

    Incorrectly claiming the lower rate of company tax will influence the rate of tax paid in an income year and may also influence the maximum franking credit subsequently allocated to a frankable distribution.

    If your clients have claimed the lower rate of company tax in recent income tax returns, we may contact you or your clients. We will ask you to check your clients’ returns and ensure they meet the eligibility criteria to claim the lower rate of company tax, and that they have accurate records to substantiate their claim.

    We encourage you to check all your clients who claim to be a BRE for accuracy and re-assess their eligibility each income year. To ensure lower rate of company tax eligibility and avoid administrative time to correct a mistake you can:

    • reach out to us for an early engagement discussion to seek advice on your client’s eligibility
    • apply for a private ruling to attain certainty on your client’s eligibility to claim the lower rate of company tax.

    We publish information on the behaviours, characteristics and tax issues of privately owned and wealthy groups that attract our attention to help your clients get things right and be transparent in our dealings with you.

    Last modified: 16 May 2022QC 69606