Company Income Tax Rates
The general company income tax rate is 30%.
Small business company tax rate 2017-18 is 27.5%
Arising from the 2016-17 budget (see more below), the small business company tax rate is reduced to 27.5% from 1 July 2016 (for the 2016-17 year) along with an increase in the qualifying turnover ceiling to $10 million.
The ceiling moved to $25 million from 1 July 2017, and to $50 million from 1 July 2018.
From 1 July 2017 a passive income test was introduced – see more below.
2015-16 tax rate – small business entities – 28.5%
Announced as part of the Federal Budget 2015 and now law, from 1 July 2015 the tax rate for Small Business companies was reduced to 28.5%. Before 1 July 2016, Small Businesses Entities were those with aggregated turnover (i.e. grouped with related entities) of less than $2 million.
Extension of company tax cuts bill abandoned
In addition to the modified 2016-17 budget reductions which have already passed through parliament (see below), government policy was to further reduce the corporate tax rate for all companies to reach 25% by 2026-27.
Following defeat of the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 in parliament the Bill has been abandoned.
Treatment of franking credits
The laws previously provided for the retention of a universal maximum franking rate of 30%. After the tax rate reduction, the maximum franking rate is to be 27.5% or 30% if aggregated turnover for the previous income year is equal to or exceeds the current year threshold.
In practice the extent of franking is limited by the franking account balance, and companies in due course will have lower tax credits based on the lower tax rates. Practical Compliance Guideline (draft) PCG 2017/D7 provides guidance for small businesses over-franking in 2016-17 income year because of tax rate change. See also
- ATO: Rate change for franking credits. Early-lodged 2016-7 returns may need to be amended.
- Allocating franking credits
Tax Office Guidance documents – company tax rates issues
Due to the changes surrounding the taxation of companies the Tax Office has released guidance documents.
- Update 25 July 2018: Practical compliance guideline 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
- Practical Compliance Guideline (draft) PCG 2017/D7 – provides guidance in relation to potential over-franking of dividends in the 2016-17 year for which the tax rate was reduced from 30% to 27.5%.
- Draft Taxation Ruling TR 2017/D7 – the Commissioner’s views on when a company carries on a business within the meaning of section 23AA of the Income Tax Rates Act 1986
Also announced in the 2015 budget was a tax discount of 5% up to a maximum of $1,000 applied as a tax offset for individuals with income from an unincorporated Small Business. This measure is now law, and has been subsequently revised with more generous offsets applying from 1 July 2016 – see Small Business Tax Offset
See also: Small Business Concessions
Other entities tax rates:
- Life Insurance companies – ordinary: 30%
- Complying superannuation funds: 15%
- Non-profit bodies are exempt from tax on their mutual income. Non-exempt bodies are taxable on their non-mutual net income at the following rates for 2016-17 and 2017-18:
|Non-mutual Income Tax|
|First $416 of taxable income||Nil|
|$417 to $831||55%|
|$832 and above||27.5%|
- The tax rate for a Public unit trust is also 30%.
- For Fringe Benefits Tax rates – see FBT
Company Tax Return checklist – CPA Australia
Company checklist © ICAA and Thomson Reuters
This page was last modified 2018-10-16