The full company tax rate is 30% and the lower company tax rate is 27.5%.
This information shows when to apply the lower rate and how to work out franking credits. Company tax rates apply to:
corporate unit trusts
public trading trusts.
The full company tax rate of 30% applies to all companies that are not eligible for the lower company tax rate. Eligibility for the lower company tax rate depends on whether you are a:
base rate entity from the 2017–18 to 2021–22 income years
small business entity for the 2015–16 and 2016–17 income years.
Base rate entity company tax rate From the 2017–18 to 2019–20 income years, companies that are base rate entities must apply the lower 27.5% company tax rate. The rate will then reduce to 26% in the 2020–21 income year and 25% in the 2021–22 income year. A base rate entity is a company that both:
has an aggregated turnover less than the aggregated turnover threshold – which is $25 million for the 2017–18 income year and $50 million from the 2018–19 income year
80% or less of their assessable income is base rate entity passive income – this replaces the requirement to be carrying on a business.
Base rate entity passive income is:
corporate distributions and franking credits on these distributions
royalties and rent
interest income (some exceptions apply)
gains on qualifying securities
a net capital gain
an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.
Small business entity company tax rate You need to be a small business entity to be eligible for the lower company tax rate in the 2015–16 and 2016–17 income years. For the 2016–17 income year, the lower company tax rate is 27.5%. This lower rate applies to small businesses that both:
have an aggregated turnover less than $10 million
are carrying on a business for all or part of the year.
For the 2015–16 income year, the lower company tax rate was 28.5% for small business entities with an aggregated turnover less than $2 million and carrying on a business for all or part of the year. For the 2017–18 income year and onwards, you need to be a base rate entity, rather than a small business entity to be eligible for the lower tax rate. Not-for-profit companies If you are a not-for-profit company, you don't pay tax on the first $416 of your taxable income. Tax is then shaded in at a rate of 55% of the excess over $416 until the tax on your taxable income effectively equals the company tax rate. You are then taxed at the company tax rate. As the lower company tax rate is 27.5% from 2016–17 to 2019–20, the shade in limit for not-for-profit companies has been reduced to $831 if they are:
base rate entities from the 2017–18 to 2019–20 income years
small business entities for the 2016–17 income year.
Maximum franking credits To work out the company tax rate for franking your distributions, otherwise referred to as 'corporate tax rate for imputation purposes', you need to assume your aggregated turnover, assessable income, and base rate entity passive income will be the same as the previous income year. For the 2019–20 income year, your corporate tax rate for imputation purposes is 27.5% if either:
your aggregated turnover in the 2018–19 income year was less than $50 million, and 80% or less of your assessable income was base rate entity passive income
the entity didn't exist in the previous income year.
Otherwise, your corporate tax rate for imputation purposes is 30%.
Our proactive approach ensures we build solid relationships and deliver a consistent service all year round, not just at tax time. Contact Collins Hume in Ballina or Byron Bay on 02 6686 3000, or read more at Services for Business.