From the 2017–18 income year, you must be a base rate entity to be eligible for the lower 27.5% company tax rate.
A base rate entity must have:
- a turnover less than $25 million (this turnover threshold increased to $50 million from 2018-19), and
- 80% or less of its assessable income as passive income (for example, interest, dividends or rent). This replaces the 'carrying on a business' test.
What you need to do
- Check if your company has earned 80% or less passive income and if so apply the lower rate of 27.5% when completing your company tax return (if you have more, apply the general rate of 30%).
- If you've already lodged your 2018 company tax return using the incorrect rate, you will need to make an amendment.
- When working out the company tax rate to use for franking your distributions, use your previous year's turnover, assessable income and base rate entity passive income.
- If you’ve issued distribution statements using the incorrect rate, you should tell your shareholders the correct dividend and franking credit amounts as soon as possible. You should also let us know the correct amounts through your company's annual dividend reporting process.
Source: Australian Tax Office website