Yes, changes to company tax rates again…

But not for a few years…

As we have previously discussed here, there are two company tax rates. They are 30%, or if the company has an aggregated turnover under $50m ($25m last year) and has less than 80% of its income from “base rate passive income”, the rate is 27.5%.

In the Treasury Laws Amendment (Lower Taxes For Small and Medium Businesses) Bill 2018 ONLY the rate of 27.5% changes. The same companies are eligible for the lower rate, but that rate will be:

– 26% from 1 July 2020; and

– 25% from 1 July 2021.

So the difference between to top marginal rate and the company rate for small and medium businesses goes to 22%. That is not going to encourage warehousing income in companies??? More PSI cases and more Div 7A ideas…

This Bill also increases the Small Business Income Tax Offset to 13% from 1 July 2020 and 16% from 1 July 2021… But as this offset is capped at $1,000 from 1 July 2021, if you have more than $6,250 of income from your small business, the 16% rate gets you to $1,000.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
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