How it's calculated
Australian companies pay a flat rate on their taxable income. There are two rates, set by section 23 of the Income Tax Rates Act 1986.Federal Register of Legislation
- Base rate entities pay 25%. A company is a base rate entity for the year if its aggregated turnover is under $50,000,000 and no more than 80% of its assessable income is base rate entity passive income.
- All other companies pay 30%.
- Passive income means portfolio dividends and their franking credits, non-share dividends, interest, royalties, rent, gains on qualifying securities, net capital gains, and partnership or trust distributions that come from these.
- Aggregated turnover includes the turnover of entities connected with or affiliated to the company, so a small company in a large group may not qualify.
The formula
- Base rate entity? = turnover < $50 million and passive income ≤ 80% of assessable income.
- Company tax = taxable income × 25% (base rate entity) or × 30% (otherwise).
- Profit after tax = taxable income − company tax.
Worked example
A trading company with $200,000 taxable income and $2 million turnover is a base rate entity and pays $50,000, which saves $10,000 against the 30% rate.
| Line | Amount |
|---|---|
| Taxable income | $200,000 |
| Company tax at 25% | $50,000 |
| Profit after tax | $150,000 |
An investment company earning $200,000 that is 90% rent and interest pays $60,000 at the full rate.
| Line | Amount |
|---|---|
| Taxable income | $200,000 |
| Company tax at 30% | $60,000 |
| Profit after tax | $140,000 |
Assumptions and limitations
- Taxable income is after deductions and any losses you carry forward.
- Not modelled: the special rates for RSA providers, pooled development funds, non-profit companies and credit unions, life insurance companies, corporate unit trusts, and the franking of dividends paid to shareholders.
- This shows the tax for the year only, not when it is paid.