The company tax rate cuts for small business entities were introduced for the 2016/17 and later income years.  The rate was reduced to 27.5%. Though ultimately, the company tax rate for entities below $50m in turnover will be reduced, subject to Parliamentary approval, to 25% starting from the 2026/27 income year.

Further to this legislation, administrative treatment has been released which clarifies which companies have access to the lower company tax rates (because not all qualify). For the 2015/16 and 2016/17 income years, a company which is under the aggregated turnover threshold ($2m and $10m) and is carrying on a business will have lower than general tax rates.

In the administrative treatment, the ATO has confirmed that carrying on a business will be finalised in TR 2017/D7 to include small business entities. Companies which have the intention of making a profit are considered to be carrying on a business!

Legislation introduced in October 2017 which presently remains in the Senate will change access to these corporate tax cuts. Pending approval, from the 2017/18 income year these tax cuts will apply to companies who are considered a base rate entity.  A base rate entity is a company who has less than 80% of assessable income from passive sources.

See the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018 here.