House of Representatives

Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017

Second Reading Speech

Ms O'DWYER (Higgins-Minister for Revenue and Financial Services)

I move:

That this bill be now read a second time.

This bill clarifies that passive investment companies do not qualify for the lower company tax rate.

The amendments in this bill will introduce a clear test that enables companies to determine whether they are eligible for the lower rate of tax of 27.5 per cent.

Companies that derive more than 80 per cent of their assessable income in passive forms will not be able to access the lower company tax rate. The 'passive income' test replaces the 'carry on a business' test as a requirement for access to the lower company tax rate. The new test will have effect from the 2017-18 income year. It will make it easier for companies to determine which tax rate applies, thus providing companies with greater certainty about their taxation liabilities.

The Turnbull government is reducing company tax to make Australia a more attractive location to do business. A lower rate will enable companies to reinvest more of their profits, grow their businesses and increase employment.

The consequential amendments in this bill will align imputation arrangements with the new test.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.