On 12 May 2022, the Australian Taxation Office (ATO) has released a guide to help a corporate entity determine if it is eligible for the reduced company tax rate of 25%. These include companies, corporate unit trusts and public trading trusts.
According to the ATO, if the company is a “base rate entity” for a tax year, its company tax rate is 25% from the 2021-2022 income year onwards.
Eligibility Criteria
To be a “base rate entity,” the following criteria must be met:
- Aggregated turnover for the income year is less than the aggregated turnover threshold (which is $50 million from the 2018–19 income year onwards, or $25 million for the 2017–18 income year)
- Passive income cannot exceed 80% of the company’s assessable income in that income year. Passive income includes corporate distributions and franking credits, royalties and rent, income from interest, gains on qualifying securities, and net capital gains.
The standard company tax rate of 30% applies to all companies that are not eligible for this lower company tax rate.
