Reducing the company tax rate to 25%
The government will reduce the company tax rate to 25% over 10 years. The rate will firstly be reduced to 27.5%, and then it will be reduced progressively to 25% in 2026-27. Dividends will be frankable in line with the rate of tax paid by the company.
The initial 27.5% rate will be implemented progressively from 2016-17 to 2022-23 based on the company’s annual aggregated turnover:
|Current (2017-18)||Proposed (2018-19)|
|Minimum repayment threshold||$55,874||$42,000|
|Minimum repayment rate|
(applies to minimum repayment threshold)
|Maximum repayment rate||8% (from $107,214)||9.5% (from $100,655)|
Once all companies are at a rate of 27.5%, the rate will be progressively reduced to 25% in 2026-27:
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Amendments to Division 7A
The government intends to make targeted amendments to improve the operation and administration of Division 7A (that is, the deemed dividend regime that applies to private companies). The amendments will apply from 1 July 2018 and will include:
· a self-correction mechanism for inadvertent breaches of Division 7A
· appropriate safe harbour rules to provide certainty
· simplified Division 7A loan arrangements; and
· a number of technical adjustments.
Large multinationals – integrity measures
There will be a new tax aimed at large multinational corporations that artificially divert profits from Australia, from 1 July 2017. A 40% tax on “diverted profits” will apply where the company shifts profits offshore through arrangements that exhibit certain characteristics. It has been dubbed the “Google” tax by various media outlets.
The measure will apply to companies with global revenue of $1 billion or more. Companies with Australian revenue of less than $25 million will be exempt, unless they are artificially booking their revenue offshore.
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