Small Business Company Tax

From the 2016–17 income year, the small business company tax rate has been reduced to 27.5%. This lower rate now applies to small businesses with a turnover (that is, aggregated turnover) less than $10 million that are:

• companies
• corporate unit trusts
• public trading trusts.

The company tax rate will remain at 30% for all other companies that are not small business entities.

For the 2015–16 income year, the small business company tax rate was 28.5% for companies with a turnover less than $2 million and 30% for all other companies. Previous to this, it was 30% for all companies.

Maximum franking credits

The maximum franking credit than can be allocated to a frankable distribution paid by a small business has reduced to 27.5% from the 2016–17 income year. This is in line with the small business company tax rate for the income year.

For the 2015–16 and previous income years, the maximum franking credit than can be allocated to a frankable distribution was 30%.

If you are a small business and have already issued your 2016–17 distributions based on the 30% company tax rate, you need to notify your members of the correct dividend and franking credit amounts based on the 27.5% company tax rate.

Future year company tax rates

The reduced company tax rate will progressively apply to companies with a turnover less than $50 million by the 2018–19 income year. The rate will then reduce for these companies to 25% by the 2026–27 income year.