The previously legislated tax cuts for small business included a reduction to eligible entity’s rate to 27.5% and a progressive ramp up of the Turnover threshold, peaking in the current FY19 year at $50 million. After a stabilising period, the rate was then legislated to fall from 27.5% to 25% during the FY25 through FY27 years.

Following the government’s failure to legislate a further increase in the Turnover threshold (previously announced to extend to all companies), the continued reduction to 25% has now been brought forward. The accelerated reduction in tax rate will now occur between FY21 and FY22, resulting in the 25% rate previously intended. Having recently received royal assent and becoming law, the following rates will now apply to all companies that earn no more than 80% of their income from passive sources and have an aggregated turnover of less than $50 million.

Company Tax Rate

Income year           Aggregated turnover threshold                     Tax rate for base rate entities                        Tax rate for all other
under the threshold                                        companies
2017–18                  $25m                                                                   27.5%                                                                 30.0%
2019–20                 $50m                                                                   27.5%                                                                 30.0%
2020–21                 $50m                                                                   26.0%                                                                30.0%
2021–22                 $50m                                                                   25.0%                                                                 30.0%

An entity may be aggregated for their turnover under the Control Test where a taxpayer has either:

• shares and other equity interests in the company that gives you and your affiliates at least 40% of the voting power in the company

• you hold interest in an entity that gives you the right to receive at least 40% of any income or capital the company distributes.

For further information contact Noe at noe@viccaca.com, Oggy at oggy@viccaca.com or Hayden at hayden@viccaca.com.

Date of Issue: 26 October 2018

Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.