Company tax rate and SMEs changes passed by the Senate
Late on 31 March 2017 the Senate approved amendments to implement the company tax rate changes. The effect of the Government's amendments is that a reduced corporate tax rate of 27.5% will only apply to businesses with an aggregated turnover of less than $50m from the 2018-19 onwards, however it is phased in over an earlier 3-year period:
In the 2016-17 financial year the reduced corporate tax rate of 27.5% will only apply for businesses with an aggregated turnover of less than $10m;
In the 2017-18 financial year the reduced corporate tax rate of 27.5% will only apply for businesses with an aggregated turnover of less than $25m, and
In 2018-19 financial year it will apply to businesses with an aggregated turnover of less than $50m
It is intended that thereafter the corporate tax rate will also be further reduced in stages, starting from 1 July 2024, so that the corporate tax rate will eventually fall to 25% by the 2026-27 fiscal year.
The Enterprise Tax Plan Bill also included the following measures and clarifications to existing eligibility criteria:
increase the small business entity turnover to $10m, effective 1 July 2016;
increase the unincorporated small business tax discount from 5% to 10%, to be phased in over a slow burn 10-year period, subject to the following additional conditions;
allow small businesses with an aggregated turnover of less than $10m to access most small business tax concessions except for the CGT concessions under Div. 152 (refer to the Small Business rules summary below in italics;) however,
the threshold for accessing the small business income tax offset will be $5m (aggregated turnover)
The Div. 152 rules remain inaccessible under the above amendments. 3 eligibility conditions to the additional Small Business CGT discount of 50% remain in force:
(a) the entity must be a small business entity or a partner in a partnership that is a small business entity, or the net value of assets that the entity and related entities own must not exceed $6,000,000;
(b) the CGT asset must be an active asset;
(c) if the asset is a share or interest in a trust, there are additional CGT concession stakeholder tests
Specific conditions that also must be satisfied. For example, the 15-year exemption applies only if you have held the CGT asset for at least 15 years and you retire.
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