COMPANY TAX RATE CUT
/
In the 2017 Financial Year, any company carrying on a business with a turnover of less than $10million was eligible for a tax rate cut from 30% to 27.50%.
On 31 August 2018 the treasury laws amendment (Enterprise tax plan Base rate entities) Bill 2017 introduced by the Government was passed stating that for Financial Year 2018 lodgements, lower corporate tax rate applies for:
Corporate entities with a turnover of <=25m
having no more than 80% of base rate entity passive income will be eligible for the lower corporate tax rate.
What is a Base rate entity (BRE) passive income comprise of?
dividends other than non-portfolio dividends
franking credits on such dividends
non-share dividends
interest income (some exceptions apply)
royalties and rent
gains on qualifying securities
net capital gains
income from trusts or partnerships, to the extent it is referable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.
In a broader aspect it means a company can now have a lower tax rate if:
it manages a portfolio of rental property but the rental income excluding reimbursement are not more than 80%!
A bucket company who receives distribution which does not comprise of Base rate entity passive income which is rent, interest, dividend …
If you would like to discuss this further, please contact our office.
Our post next week will be about the impact these company tax rate cuts have on your franking accounts.