What To Know About Australia’s Company Tax Rates (2019 Update)

Confused about Australia’s new company tax rates? You’re not alone!

In this post, we look at the current taxation environment that affects all size businesses across the country, and what the current corporate tax rates are.

Over the last few years, there has been a global trend to lower corporate taxes. 2017 alone, saw a lot of talk about changing tax rates both at home and abroad. The topic heated up when in December 2017, the US slashed its company tax rate by 14% – from 35 to 21%.

Australian company tax rates on a global scale

The Organisation for Economic Co-operation and Development (OECD) first report published in January 2019, compared business tax rates across more than 100 countries.

The report found Australia had a larger corporate tax rate of 30%, higher than many competitors including New Zealand, Italy, South Korea, Canada, the United States, Norway and Britain.

In their report, the OECD did note that Australia offered businesses the lowest direct subsidies and tax breaks for research and development.

Australia had not lowered its corporate tax rates since 2000. However, in May 2017, the Australian government passed the first phase of the Enterprise Tax Plan, cutting the company tax rate to 27.5 percent (from 30 percent for companies with an annual turnover of up to $50 million over the next four years.)

On 16 October 2018, the Government introduced the Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018.

This will accelerate future reductions in the corporate tax rate for base rate entities. Further company tax cuts will see the company tax rate at 25 per cent by 2021-2022. For larger companies (above $50 million turnover), the rate will remain at 30%.

What is company tax in Australia?

A company business structure is taxed as a separate legal entity that does its own tax return.

These businesses are required to lodge an annual corporate tax return which shows:

• the company’s income
• deductions
• the income tax it is liable to pay, based on profits (the difference between income and deductions).

There is no tax-free threshold for a company business structure.

Current company tax rates

The company tax rate 2019 financial year is currently 30%. The small business company tax rate is 27.5%.

2019 tax rates

From the 2018–19 income year, companies that are base rate entities must apply the lower 27.5% company tax rate.

A base rate entity is a company that:

• has an aggregated turnover less than the turnover threshold – which is $50 million for the 2018–19 income year, and
• is carrying on a business.

If your business turns over $50 million or more, the company tax rate is 30 per cent. There are a few exceptions to these corporate tax rates, depending on your industry and NFP.

The only change during this financial year is that the base rate has increased from $25 million to $50 million turnover, with the company tax rate remaining the same at 27.5%.

For the next financial tax year 2019-2020, the company tax rate will remain at FY19 company tax rates.

What is the foreign company tax rate in Australia?

A non-resident company is taxed on its Australian source income at the same rate as a resident company. The company tax rate for the 2019 financial year is currently 30%. The small business company tax rate is 27.5%.

Taxable income and the tax rate may vary under limited circumstances, such as industry or business structure.

Full details of the new Australian corporate tax rates can be found here

Future year company tax rates

The 27.5% rate will remain the same for the 2019-20 income year, however, the base rate entities turnover threshold will rise to under $50 million.

The rate will then reduce to 25% by the 2021–22 income year.

Past corporate tax rates

FY18 company tax rates

From the 2017–18 income year, companies that are base rate entities must apply the lower 27.5% small business tax rate.

A base rate entity is a company that:

• has an aggregated turnover less than the turnover threshold – which is $25 million for the 2017–18 income year, and
• is carrying on a business.

If your business turns over $25 million or more, the rate is 30 per cent. There are a few exceptions to these company tax rates, depending on your industry and NFP.

FY17 company tax rates

For the 2016–17 income year, the lower tax rate is 27.5%. The lower small business tax rate must be applied to businesses that:

• have an aggregated turnover of less than $10 million, and
• are carrying on a business.

If your business turns over $10 million or more, the rate is 30 percent.

Still have questions about company tax?

If you still have questions regarding your business, its turnover or eligibility for the new or existing tax rates, Penguin Management can help.

Get in touch via the form on this page, or call +61 2 8298 5301 to discuss your business taxation and accounting needs.

Further reading

Poor cash flow management is not just a problem in the short term, it can limit your business’ future plans and growth. Read our post on 8 ways to take control of your cash flow.

Is your business looking to expand to Australia? As a business built on helping global companies set up in Australia, our post on why your start-up should set up in Sydney is an informative read.