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Changes to tax rates for Base Rate Entities

Changes to tax rates for Base Rate Entities

In the 2017-18, 2018-19 and 2019-20 income years, companies that are classified as Base Rate Entities must apply the 27.5% company tax rate.

In the 2020-21 income year, the tax rate has reduced to 26%. From the 2021-22 income year onwards, the tax rate will lower again to 25%.

A Base Rate Entity is a company that both:

  • has an aggregated turnover less than $25 million for the 2017–18 income year, and less than $50 million from the 2018–19 income year onwards.
  • 80% or less of their assessable income is Base Rate Entity passive income

Base Rate Entity passive income is:

  • corporate distributions and franking credits on these distributions
  • royalties and rent
  • interest income (some exceptions apply)
  • gains on qualifying securities
  • a net capital gain
  • an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.

Companies that do not qualify as Base Rate Entities are required to pay 30% tax for all financial years.