On 3 May 2016, the government of Australia announced in the 2016–17 Budget that it will reduce the corporate tax rate progressively from 30 per cent to 25 per cent.
Currently, there is a small business corporate tax rate which is less than the headline corporate tax rate. Companies with an aggregated annual turnover below $2 million are taxed at 28.5 per cent and companies with an aggregated annual turnover of $2 million or above are generally taxed at 30 per cent.
The government announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016-17 income year. The turnover threshold to qualify for the lower rate will start at $10 million and progressively rise until the 27.5 per cent rate applies to all corporate tax entities subject to the general company tax rate in the 2023-24 income year.
The corporate tax rate will then be cut to 27 per cent for the 2024-25 income year and by one percentage point in each subsequent year until it reaches 25 per cent for the 2026-27 income year. The maximum franking credit that can be allocated to a frank-able distribution paid by a company will be based on the company’s applicable corporate tax rate.
