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.
More company tax cuts (still) planned
The government has re-committed to its 10-year Enterprise Tax Plan to reduce the company tax rate to 25% for all companies by the year 2026-27. This would mean that in addition to the modified 2016-17 budget reductions which have already passed through parliament (see below), the corporate tax rate is to be further reduced in stages from 1 July 2024 to reach 25% by 2026-27 for businesses with an aggregated turnover of less than $50 million.
For progress of this measure through parliament see Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017
- Schedule 1 to the Bill progressively extends the lower 27.5% rate to all corporate tax entities by the 2023-24 income year.
- The corporate tax rate will then be cut, for all corporate tax entities, to:
- for the 2024-25 income year — 27%;
- for the 2025-26 income year — 26%; and
- for the 2026-27 income year and later income years — 25%
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
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:
|Non-mutual Income Tax|
|First $416 of taxable income||Nil|
|$417 to $915||55%|
|$916 and above||30%|
- 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 2018-07-13