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  • Introduction

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    These instructions will help you complete the Company tax return 2018 (NAT 0656), the tax return for all companies, including head companies of consolidated and multiple entity consolidated (MEC) groups.

    These instructions contain a number of abbreviations for names and technical terms. Each term is spelt out the first time it is used. For more information, see Abbreviations.

    What’s new?

    In this section:

    Company tax rate changes

    From 2017–18, the lower company tax rate of 27.5% applies to corporate tax entities that are a base rate entity. The company tax rate remains at 30% for all other companies that are not a base rate entity.

    These changes do not apply to corporate tax entities that are subject to a specific rate of tax, for example, companies in trustee capacity and certain life insurance, PDF, non-profit companies and medium credit unions.

    A corporate tax entity may be both a base rate entity for the lower company tax rate purposes and a small business entity for the purposes of the small business concessions.

    For more information, see:

    Maximum franking credits

    The maximum franking credit that can be allocated to a frankable distribution is based on a company's applicable corporate tax rate for imputation purposes.

    For 2017–18, a company's corporate tax rate for imputation purposes may be either 27.5% or 30% depending on the company's circumstances.

    For more information, see Allocating franking credits.

    Expanding accelerated depreciation for small businesses

    New laws have passed allowing small businesses to claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, from 12 May 2015 provided each depreciable asset costs less than $20,000. This replaces the previous instant asset write-off threshold of $1,000.

    This measure started 7.30pm (AEST) 12 May 2015 and will end on 30 June 2018.

    In the 2018 Budget, the government announced its intention to extend the end date of this measure to 30 June 2019. At the time of publishing, this change had not yet become law.

    The balance of the general small business pool is also immediately deductible if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2018 (including an existing general small business pool).

    The 'lock out' laws have also been suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2018.

    Foreign resident capital gain withholding

    On 9 May 2017 the government announced changes to the threshold and withholding rate for foreign resident capital gains withholding. The changes apply to contracts entered into on or after 1 July 2017.

    A 12.5% withholding obligation will apply to the disposal of:

    • taxable Australian real property with a market value of $750,000 or more
    • an indirect Australian real property interest
    • an option or right to acquire such property or interest.

    Where the vendor of these Australian assets is a foreign resident, the purchaser must pay 12.5% of the purchase price to the ATO as a foreign resident capital gains withholding payment.

    A vendor can claim a credit for the foreign resident capital gains withholding payment the purchaser has made to the ATO by lodging a tax return for the relevant year.

    The previous market value exemption threshold of $2 million for real property and 10 per cent withholding rate will apply for any contracts that were entered into before 1 July 2017 (even if settlement is after that date).

    See new legislation for more information about foreign resident capital gains withholding:

    • obligations
    • exclusions, and
    • exceptions.

    For more information, see Capital gains withholding: Impacts on foreign and Australian residents.

    Corporate unit trusts and public trading trusts

    For income years starting on or after 1 July 2016, the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016External Link:

    • repeals the corporate unit trust rules in Division 6B of Part III of the Income Tax Act 1936 (ITAA 1936). This means that trusts formerly subject to Division 6B are no longer 'corporate unit trusts'. Such trusts may either continue to be taxed similarly to companies if they are a 'public trading trust' under Division 6C (and should lodge a company tax return) or be taxed as a trust (and should lodge a trust tax return).
    • modifies the 20% tracing rule in Division 6C of the ITAA 1936. This means that a trust will no longer be a public unit trust for the purposes of Division 6C of the ITAA 1936 solely because 20% or more of its membership interests are held by complying superannuation entities or tax exempt entities that are eligible for a refund of franking credits.
    • introduces transitional rules to allow trusts that cease to be subject to Divisions 6B and 6C of the ITAA 1936 to deal with their franking accounts in respect of certain events that happen on or before 30 June 2018. For example, distributions of profits that arose whilst the trust was a corporate unit trust or public trading trust may be franked where the distribution is made on or before 30 June 2018.

    For more information, see

    Increasing access to company losses

    On 1 March 2019, legislation was enacted that will supplement the current ‘same business test’ for company losses with a more flexible 'similar business test'. The new test will expand access to past year losses when companies enter into new transactions or business activities.

    The similar business test will allow a company to access losses following a change in ownership where its business, while not the same, is similar having regard to:

    • the extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income
    • the extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income
    • the identity of its current business and the identity of its former business, and
    • the extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services or marketing or organisational methods of the former business.

    As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.

    The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.

    This measure takes effect in relation to income years starting on or after 1 July 2015. For more information, see New legislation.

    See also:

    Significant Global Entity (SGE)

    The significant global entity (SGE) concept is used to give clarity to taxpayers about whether they are within the scope of the measures to which the definition applies.

    The concept of SGE was introduced as part of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 legislation which contains a package of measures announced as part of the 2015-16 BudgetThis link opens in a new window. Further measures were announced in the 2016-17 BudgetExternal Link. These measures focus on combating multinational tax avoidance.

    An entity is a SGE if it is:

    • a global parent entity with an annual global income of A$1 billion or more, or
    • a member of a group of entities consolidated for accounting purposes and one of the other group members is a global parent entity with an annual global income of A$1 billion or more.

    SGEs taxpayers must self-assess themselves under the definition of a SGE and notify the ATO on their annual company tax return at 'Status of company' (item 3, G1).

    The SGE concept is part of the following measures:

    See also:

    The multinational anti-avoidance law (MAAL)

    The Multinational Anti-Avoidance Law (MAAL) is part of the government's efforts to combat tax avoidance by multinational companies operating in Australia. The MAAL has been introduced to ensure that multinationals pay their fair share of tax on the profits earned in Australia. It is aimed at SGEs that enter into artificial arrangements to avoid taxation in Australia (or elsewhere) when supplying goods or services to Australian customers.

    See also:

    Diverted profits tax (DPT)

    The DPT aims to:

    • ensure that the tax paid by SGEs properly reflects the economic substance of their activities in Australia
    • prevent the diversion of profits offshore through arrangements involving related parties, and
    • encourage SGEs to provide the ATO with sufficient information to allow for the timely resolution of tax disputes.

    The DPT imposes a 40% tax on the diverted profit and will act to complement and strengthen our existing tax laws.

    See also:

    General Purpose Financial Statement (GPFS)

    SGEs that are corporate tax entities are required to give the Commissioner a general purpose financial statement (GPFS) if they:

    • are Australian residents or foreign residents operating an Australian permanent establishment at the end of the income year, and
    • do not lodge a GPFS with the Australian Securities & Investments Commission (ASIC) within the time provided under subsection 319(3) of the Corporations Act 2001.

    New item 5 has been added to the tax return to allow taxpayers to indicate if they have lodged or will be lodging a GPFS with ASIC.

    Country-by-Country (CbC) reporting

    Country-by-Country (CbC) reporting is part of a broader suite of international measures aimed at combating tax avoidance through more comprehensive information being provided to the ATO to better conduct risk assessments associated with transfer pricing.

    The measure takes effect from income years commencing on, or after, 1 January 2016. It requires SGEs to supply the ATO with three statements which will provide a clear overview of its global and Australian operations. This information will be shared with tax authorities in the other jurisdictions in which the group operates. The measure also contains revised standards for transfer pricing documentation.

    See also:

    International Dealings Schedule (IDS)

    Entities subject to CbC reporting are generally required to lodge a local file with the tax office as a part of their obligations under the regime. An administrative arrangement is in place with respect to such entities: taxpayers may be exempt from completing labels 2 to 17 of the IDS if they lodge Part A of the local file at the same time as their income tax return.

    See also:

    Increasing administrative penalties for SGEs

    On 3 May 2016, the government announced the 'Tax integrity package - increasing administrative penalties for significant global entities' measure. This measure applies to conduct occurring from 1 July 2017.

    Administrative penalties for statements will be doubled. This increases the penalties imposed on SGEs that do not take reasonable care, take a tax position that is not reasonably arguable, or fail to provide documents when required and the Commissioner determines the liability without the document.

    Failure to lodge on time (FTL) penalties for SGEs will be increased. The base penalty amount will be multiplied by 500 if the entity concerned is an SGE.

    Last modified: 03 Oct 2019QC 55199