BUSINESS TAX RATES AND SMALL BUSINESS TAX OFFSET CHANGES 

The Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018 was introduced into and passed by the House of Representatives on 16 October 2018 and passed by the Senate on 18 October 2018. The Bill implements the proposal to accelerate reduction of the tax rate for base rate entities (ie corporate tax entities that derive no more than 80% of their income in passive forms and have an aggregated turnover of less than $50 million).

Corporate tax rate

Under the measures, the corporate tax rate for base rate entities will reduce from 27.5% to 26% in 2020–2021, before being cut to 25% for 2021–2022 and later income years. This means eligible taxpayers will have a tax rate of 25% in 2021–2022, rather than from 2026–2027 as previously legislated. This is summarised in the following table.

Note that the tax rate for corporate tax entities which do not qualify as base rate entities remains unchanged at 30%.

Unincorporated businesses’ tax offset

In addition, the Bill increases the small business income tax offset rate to 13% of an eligible individual’s basic income tax liability that relates to their total net small business income (ie unincorporated businesses) for 2020–2021. This offset rate will then increase to 16% for 2021–2022 and later income years. This is summarised in the following table.

Note that the small business income tax offset continues to be capped at $1,000 per individual per year.

The changes will commence in 2020–2021. The measure was previously announced by the Government on 11 October 2018. The speedy passage demonstrates that tax legislation can in fact pass through Parliament promptly, if it is deemed politically expedient

If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 14 Russell Street Toowoomba.