New passive income test for lower corporate tax rate
New rules ensure that companies with more than 80% passive income will not qualify for the reduced company tax rate.
Calculations of a business’s “passive income” would include:
- distributions by corporate tax entities (other than non-portfolio dividends);
- franking credits attached to such distributions;
- non-share dividends;
- interest;
- royalties;
- rent;
- gain on qualifying securities;
- net capital gains; and
- amounts included in the assessable income of partners in a partnership or beneficiaries of a trust estate that are referable to another base rate entity passive income amount.
This will apply from the 2017–2018 income year.
The lower company tax rate of 27.5% is available in 2017–2018 for small businesses and corporate base rate entities with turnover of less than $25 million.
You must also “carry on a business” to be eligible for the lower corporate tax rate.
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