Company tax cuts pass the Senate with amendments

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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

  • Company Tax
  • ‘Bucket companies’ will not benefit from the cuts
    As a result of the amendments to the Bill, only companies that carry on business with an aggregated turnover of less than $50 million will eventually benefit from the cuts to the corporate tax rate.
    Consequently, corporate entities with at least $50 million aggregated turnover or, more importantly, companies that do not carry on business (e.g., passive investment companies and ‘bucket companies’) will continue to have a corporate tax rate of 30%.

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.