Assess whether a company may meet the base rate entity tests and estimate the company tax outcome using the applicable tax rate.
A company is not able to choose the lower company tax rate simply because it prefers that outcome. Base rate entity status is determined by statutory tests for the relevant income year. Broadly, a company must have aggregated turnover of less than $50 million and no more than 80% of its assessable income can be base rate entity passive income.
From the 2021–22 income year onward, a company that qualifies as a base rate entity is generally taxed at 25%, while the general company tax rate is 30% for companies that do not qualify, subject to special entity rules. This calculator helps test the main thresholds, but connected entities, affiliates and the character of passive income can require closer analysis.
Understand the turnover and passive-income tests that determine base rate entity status.
No. A company either satisfies the statutory base rate entity tests for the income year or it does not.
The company’s aggregated turnover for the income year must be less than $50 million. Aggregated turnover can include the annual turnover of entities that are connected with or affiliated with the company under the tax rules.
It includes specified passive income such as certain dividends and franking credits, interest, rent, royalties, net capital gains and some trust or partnership income that is traceable to passive income. Detailed classification rules apply.
A qualifying base rate entity is generally subject to a 25% company tax rate. A company that does not qualify is generally subject to the 30% company tax rate, unless a special rate or entity rule applies.
Yes. The tests are applied for each income year. Changes in aggregated turnover or the proportion of passive income can change whether the company is a base rate entity from one year to another.
SMH Accountants & Advisors can review turnover, connected entities and passive income before the company tax return is finalised.
