On 18 October 2018, the Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018 was passed by both houses of the Australian parliament. The legislation brings forward tax relief for small and medium businesses by amending the Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 to:
- Reduce the corporate tax rate for corporate tax entities that derive no more than 80% of their income in passive forms and have an aggregated turnover of less than AUD 50 million (base rate entities) to 26% for the 2020-21 income year and to 25% from the 2021-22 income year;
- Increase the small business income tax offset rate for small businesses that have an aggregated turnover of less than AUD 5 million to 13% for the 2020-21 income year and to 16% from the 2021-22 income year; and
- Make consequential amendments to various headings of the Act to reflect the accelerated implementation of the tax rate reductions and tax offset increases.
The corporate tax rate for base rate entities was scheduled to be reduced to 27% for the 2024-25 income year, 26% for the 2025-26 income year, and 25% from the 2026-27 income year. Similarly, the tax offset rate for small businesses was scheduled to be increased to 10% for the 2024-25 income year, 13% for the 2025-26 income year, and 16% from the 2026-27 income year.
The bill now awaits Royal Assent to be enacted.