Australia: Guidance regarding reduced company tax rate

To be a “base rate entity,” a certain criteria must be met

To be a “base rate entity,” a certain criteria must be met

The Australian Taxation Office (ATO) has released a guide to help a corporate entity determine if it is eligible for the reduced company tax rate of 25%.

According to the ATO, if the company—including a corporate unit trust or a public trading trust—is a “base rate entity” for a tax year, its company tax rate is 25% from the 2021-2022 tax year onwards.

To be a “base rate entity,” the following criteria must be met:

  • Aggregated turnover for the tax year is less than the aggregated turnover threshold (which is $50 million* from the 2018–19 tax year onwards)
  • Passive income (including corporate distributions and franking credits, royalties and rent, income from interest, gains on qualifying securities, and net capital gains) cannot exceed 80% of the company's assessable income in that tax year

The full company tax rate of 30% applies to all companies that are not eligible for this lower company tax rate.

*$ = Australian dollar



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