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 |
---|---|---|---|
2015-2016 | $2m | 28.5% | 30.0% |
2016-2017 | $10m | 27.5% | 30.0% |
2017-2018 | $25m | 27.5% | 30.0% |
2018-2019 | $50m | 27.5% | 30.0% |
2019-2020 | $100m | 27.5% | 30.0% |
2020-2021 | $250m | 27.5% | 30.0% |
2021-2022 | $500m | 27.5% | 30.0% |
2022-2023 | $1b | 27.5% | 30.0% |
2023-2024 | No threshold | 27.5% | 27.5% |
2024-2025 | No threshold | 27.0% | 27.0% |
2025-2026 | No threshold | 26.0% | 26.0% |
2026-2027 | No threshold | 25.0% | 25.0% |
Start Date
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.