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Federal Budget 2016 wrap up – General Business

REDUCING THE COMPANY TAX RATE TO 25%

The government will reduce the company tax rate to 25% over 10 years. The rate will firstly be reduced to 27.5%, and then it will be reduced progressively to 25% in 2026-27. Dividends will be frankable in line with the rate of tax paid by the company.

The initial 27.5% rate will be implemented progressively from 2016-17 to 2022-23 based on the company’s annual aggregated turnover:

Annual aggregated
turnover threshold
Income year in which
the 27.5% rate will apply
Less than $10 million2016-17
$25 million2017-18
$50 million2018-19
$100 million2019-20
$250 million2020-21
$500 million2021-22
$1 billion2022-23

Once all companies are at a rate of 27.5%, the rate will be progressively reduced to 25% in 2026-27:

Income yearTax rate
2022-2327.5%
2023-2427.5%
2024-2527%
2025-2626%
2026-2725%

AMENDMENTS TO DIVISION 7A

The government intends to make targeted amendments to improve the operation and administration of Division 7A (that is, the deemed dividend regime that applies to private companies). The amendments will apply from 1 July 2018 and will include:

  • a self-correction mechanism for inadvertent breaches of Division 7A
  • appropriate safe harbour rules to provide certainty
  • simplified Division 7A loan arrangements; and
  • a number of technical adjustments.

Please contact TNR for more information.