Company Tax Rates

Not only have we had a change in Prime Minister since our last newsletter, there have also been some developments relating to corporate tax rates.  Particularly for small to medium size companies. 

The proposal to reduce the tax rate for large companies with over $50 million of grouped turnover has been scrapped and will remain at 30%.
Companies with less than $25 million of grouped turnover may be eligible for the reduced tax rate of 27.5% provided they meet certain requirements.
One of these such requirements is that more than 20% of the assessable income of the company is business income.  Non business income is defined as passive income and includes interest, rent and dividends.
Also note the lower tax rate is automatic, therefore there is no discretion to choose which rate you would prefer.
It should also be noted that when a company moves onto the 27.5% tax rate, all future dividends that company pays will be franked at the rate of 27.5%, not 30%.  This could then have implications for the company's shareholders who would have less franking credits attached to their dividends.

Please note this is general information and if you wish to seek further clarification on your individual circumstances please contact us here.

Or you may wish to jump onto the ATO website for further reading.