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Australia Consults on Eligibility for Reduced Corporate Tax Rate — Orbitax Tax News & Alerts

On 18 September 2017, the Australian Treasury launched a public consultation on the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017. The legislation would amend the Income Tax Rates Act 1986 to ensure that a corporate tax entity would only qualify for Australia's reduced corporate tax rate if:

  • The corporate tax entity carries on a business in the income year;
  • The aggregated turnover of the corporate tax entity for the income year is less than the aggregated turnover threshold for that income year; and
  • The corporate tax entity does not have passive income for that income year of 80% or more of its assessable income for that income year (new condition).

Currently, the reduced rate is 27.5% as set by the Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 ({News-2017-05-26/A/2-previous coverage}). The reduced rate is available for smaller companies (base rate entities) meeting an aggregated turnover threshold of AUD 10 million for 2016-17, AUD 25 million for 2017-18, and AUD 50 million for 2018-19. A separate bill, the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, is currently before the House of Representatives and would progressively extend the reduced rate to all companies by 2023-24. If this bill enters into force and commences, the restriction based on passive income would apply accordingly as the turnover threshold increases each year and would be repealed effective 2023-24.

Click the following link for the Treasury consultation page. The closing date for submissions is 29 September 2017.