5 tax tips for small businesses – Correct company tax rate

A few tips that small businesses should consider when preparing their tax returns are:

1. Check if you are applying the correct company tax rate;
2. Check if you are entitled to the small business income tax offset;
3. Check if you are entitled to a small business CGT concession;
4. Ensure that deductions are only claimed for business (not personal) expenses; and
5. Keeping the right records to support your claims.

 

 

Correct company tax rate

Companies will pay tax at the full rate of 30% or at the lower rate of 27.5% if certain eligibility requirements are met.

The ATO has published a useful table to help companies determine which tax rate is applicable.

 

Income year Aggregated turnover threshold Tax rate for base rate entities* under the threshold Tax rate for all other companies
2017–18 $25m 27.5% 30.0%
2018–19 to 2019–20 $50m 27.5% 30.0%
2020–21 $50m 26.0% 30.0%
2021–22 $50m 25.0% 30.0%

A base rate entity is a company that:

  • has an aggregated turnover less than the aggregated turnover threshold – which is $50 million for the 2018-19 income year; and
  • 80% or less of their assessable income is base rate entity passive income (eg corporate distributions, royalties, rent, interest income).

Tip! Small businesses should make sure whether the 30% rate or 27.5% rate applies to them.

More information on the changes to company tax rates here – https://www.ato.gov.au/

2. small business income tax offset >

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Thompsons Australia Newsletters and articles are distributed by professional tax practitioners to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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