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 email@example.com, Oggy at firstname.lastname@example.org or Hayden at email@example.com.
Date of Issue: 26 October 2018
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