On 3 May 2016, the government announced in the 2016–17 Budget that it will reduce the corporate tax rate progressively from 30 per cent to 25 per cent.
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 and progressively rise until the 27.5 per cent rate applies to all corporate tax entities subject to the general company tax rate in the 2023-24 income year.
The corporate tax rate will then be cut to 27 per cent for the 2024-25 income year 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.
A summary of the proposed rates is provided below:
|Year||Aggregated Annual Turnover Threshold||Entities under the Threshold||Other Corporate Tax Entities|
The measure will apply from the 2016-17 income year.
Legislation and supporting material
This change is not yet law and is subject to the normal parliamentary process.