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Australia Publishes Draft Law Companion Ruling for Base Rate Entities and Base Rate Entity Passive Income — Orbitax Tax News & Alerts

The Australian Taxation Office has published draft Law Companion Ruling (LCR) 2018/D7 on base rate entities and base rate entity passive income in relation to the recently approved legislation on the eligibility requirements for Australia's reduced corporate tax rate ({News-2018-08-27/A/2-previous coverage}). LCR 2018/D7 provides advice on:

  • the general scheme of the new law;
  • what amounts of assessable income are 'base rate entity passive income' (BREPI);
  • the meaning of rent, interest and when a share of net income of a trust or partnership is referable to an amount of BREPI; and
  • how to calculate a corporate tax entity's corporate tax rate for imputation purposes and work out the maximum amount of the franking credit it may attach to frankable distributions.

Once finalized, LCR 2018/D7 will apply from the 2017-18 income year and later years. Comments on the draft may be submitted up to 5 October 2018.