Company tax cuts pass the Senate with amendments

The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016  passed both Houses of Parliament late on 31 March 2017 with amendments. The following outlines the final changes to the law as passed by Parliament.

1.       Increase to the SBE turnover threshold

As per previously announced, the Small Business Entity (‘SBE’) definition has changed with respect to the turnover eligibility requirement. This has increased from $2 million to $10 million with effect from 1 July 2016 (i.e., the 2017 income year). However, this change will not apply with respect to the Small Business Income Tax Offset (‘SBITO’) and the Small Business CGT concessions (‘CGT SBCs’).

2.       Reduction in the corporate tax rate

3.      Changes to the franking of dividends

In the 2016 income year SBE companies could pay tax on their taxable income at a rate of 28.5%, while passing on franking credits to their shareholders at a rate of 30%. As the Bill passed, form 1 July 2016 the maximum franking credit that can be allocated to a frankable distribution paid by a company will be based on the tax rate that applicable for the company at the year of distribution.