From the 2017–18 income year, many small to medium-sized companies are celebrating the fact that company tax rates have been reduced from 30% to 27.5%. However, the details can be complicated according to how you earn your revenue. Now could be a good time to review your business structure to make sure you are making the most of these changes.
In 2017 the reduced rate applies to businesses with less than $10M in turnover. In 2018 the threshold is $25M before moving to $50M in 2019. From 2018 conditions will need to be met for base entities hoping to qualify for the lower tax rate. The ATO has outlined new tax rates will only apply to an entity that:
- has an aggregated turnover less than the aggregated turnover threshold – which is $25 million for the 2017–18 income year (and $50 million in 2018 – 2019)
- 80% or less of their assessable income is base rate entity passive income – this replaces the requirement to be carrying on a business.
The terms of the definition of passive income are yet to be determined. It is important business structures are most appropriate for your activities and income streams in order to take advantage of these new company tax rates. Call (08) 8272 5620 at dmca for a review of your business needs by June 30.