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Reducing the company tax rate over 10 years to 25%

Reducing the company tax rate over 10 years to 25%

As part of the 2016/17 Federal Budget tax measures, the Government has embarked on a program to lower the corporate tax rate to 25% for all companies over a period of 10 years (that is, by 1 July 2026). The corporate tax rate is currently 28.5% for small business entities (with annual aggregated turnover of less than $2 million) and 30% for all other companies.

The company tax rate reduction initiative commences from 1 July 2016 with a reduction for small business companies (with annual aggregated turnover of up to $10 million) to 27.5%.

The annual aggregated threshold will then progressively increase to the point where all companies are taxed at the rate of 27.5% in the 2023/24 financial year.

The progressive increase in the annual aggregated turnover thresholds for companies eligible for the 27.5% tax rate is as follows:

  • Less than $25 million in the 2017/18 income year;
  • Less than $50 million in the 2018/19 income year;
  • Less than $100 million in the 2019/20 income year;
  • Less than $250 million in the 2020/21 income year;
  • Less than $500 million in the 2021/22 income year; and
  • Less than $1 billion in the 2022/23 income year;
  • All companies in the 2023/24 income year.

In the 2024/25 income year, the company tax rate will reduce to 27% and will then be further reduced by 1 percentage point each year until it reaches 25% in the 2026/27 income year.

Franking credits will still be calculated with reference to the amount of tax paid by the company paying the dividends.

Proposed date of effect: Progressively from 2016/17.

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