Company tax cuts accelerated

Reducing the corporate tax rate

On 16 October 2018, the Government introduced Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018. This proposes to accelerate the legislated future reductions in the corporate tax rate for base rate entities as follows:

■ 27.5 per cent for the 2019 20 income year (as currently legislated)

■ 26 per cent for the 2020 21 income year

■ 25 per cent for the 2021 22 income year and for subsequent income years.

These changes are not yet law.

Amendment to limit the entities subject to the lower corporate tax rate

Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Act 2018 amends the law to limit the lower corporate tax rate to base rate entities with no more than 80% base rate entity passive income from 2017–18.

Under the new law, a corporate entity is a base rate entity, and will receive the lower corporate tax rate from the 2017–18 income year, if they:

  • have an aggregated turnover less than the relevant threshold
  • have no more than 80% base rate entity passive income. This income includes:
    • dividends other than non-portfolio dividends
    • franking credits on such dividends
    • non-share dividends
    • interest income (some exceptions apply)
    • royalties and rent
    • gains on qualifying securities
    • net capital gains
    • income from trusts or partnerships, to the extent it is referable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.
Base rate entities changes and timeframes
Year Aggregated turnover threshold (BRE) Corporate entities under the aggregated turnover threshold All other corporate entities
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%

Want to discuss how this impacts you and your Company or want to know more on how to transfer your business to a Company, call and speak to Lejo now (08) 94810746.

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