On 18 September 2017, the Australian Government released draft tax legislation for consultation to clarify that passive investment companies cannot access the lower company tax rate for small businesses.
The Minister for Revenue and Financial Services said the policy decision made by the Government to cut the tax rate for small companies was not meant to apply to passive investment companies.
The exposure draft bill amends the tax law to ensure that a company will not qualify for the lower company tax rate if 80 per cent or more of its income is of a passive nature (such as dividends and interest).
The income tax rate for small businesses is 27.5%. From the 2016-17 financial year the turnover threshold was increased to AUD10mn from AUD2mn. The threshold increased to AUD25m for the 2017-18 financial year and will rise again to AUD50m in 2018-19.
Minister O’Dwyer said, “The Turnbull Government is committed to lower taxes on business because we want to see them invest and grow”.
She added, “These amendments will provide greater clarity about who qualifies for the lower company tax rate by excluding passive investment companies”.
A consultation on the proposed legislation will close on 29 September 2017.
