In the 2016–17 Budget, the government announced that it will reduce the corporate tax rate progressively from 30 per cent to 25 per cent. Some government amendments have been made to this measure and these have been incorporated into the information below.
Currently, there is a small business corporate tax rate which is less than the headline corporate tax rate.
- Companies with an aggregated annual turnover below $2 million are taxed at 28.5 per cent.
- Companies with an aggregated annual turnover of $2 million or above are generally taxed at 30 per cent.
The government announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016–17 income year. The turnover threshold to qualify for the lower rate will start at $10 million (in 2016-17) and progressively rise until the 27.5 per cent rate applies to corporate tax entities with less than $50 million aggregated annual turnover in the 2018-19 income year. From 2017-18, entities eligible for the lower tax rate will be known as base rate entities.
The corporate tax rate will then be cut to 27 per cent in the 2024–25 income year for corporate tax entities with less than $50 million aggregated annual turnover and by one percentage point in each subsequent year until it reaches 25 per cent for the 2026–27 income year.
The maximum franking credit that can be allocated to a frankable distribution paid by a company will be based on the company’s applicable corporate tax rate.
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