Company Tax Rate Cut Confirmed
September 5, 2018
Legislation passed by Parliament this month limits the scope of the reduced company tax rate for the 2018 income year onwards.
The company tax rate for small business entities will be reduced to 27.5% for the 2016/17 and later income years. The new legislation will also increase access to the reduced company tax rate by progressively including more companies over the next three income years. Companies with aggregated turnover of $50m or less will have the reduced rate from 2018/19. Aggregated turnover is defined as including all connected entities and affiliates, reduced by any intra-company transactions.
Further to this legislation, administrative treatment has been released which clarifies which companies have access to the lower company tax rates. For the 2015/16 and 2016/17 income years, a company which is under the aggregated turnover threshold ($2m and $10m) and is carrying on a business will have lower than general tax rates.
In the administrative treatment, the ATO has confirmed that carrying on a business will be finalised in TR 2017/D7 to include small business entities. Companies which have the intention of making a profit are considered to be carrying on a business.
Recently passed legislation has changed access to these corporate tax cuts. Starting with the current 2017/18 income year, these tax cuts will apply to companies who are considered a base rate entity. A base rate entity is a company who has less than 80% of assessable income from passive sources.
This document contains general advice only and is prepared without taking into account your particular objectives, financial circumstances and needs. The information provided is not a substitute for legal, tax and financial product advice. Before making any decision based on this information, you should speak to a licensed financial advisor who should assess its relevance to your individual circumstances. While The Field Group believes the information is accurate, no warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided in this bulletin is not considered financial product advice for the purposes of the corporations Act 2001.