The company tax rate for companies with less than $25 million annual turnover will be 27.5% for the 2017/18 financial year.
This is a welcome relief as the government was aiming to introduce new legislation for companies that derived 20% or more of their total income from passive sources would be moved back to the 30% tax rate but the government didn’t pass the legislation before 30 June 2018. Passive income includes rent, dividends, royalties and interest.
Please note we expect the passive income measure to apply for the 2019 financial year.
Companies with aggregated turnover or $25 million or more are still subject to 30% tax. Aggregated turnover is based on the ownership of the company and the turnover other companies also owned by the same controlling entity/person.
Example: Tom owns 100% of company A and company B. Company A Turnover is $10 million for the 2018 year. Company B’s turnover is $20 million. Since Tom owns both companies, the aggregated turnover is $30 million. This means that both company A and company B are subject to the 30% tax rate, even though their individual turnover is below the threshold.
If in doubt about the tax rate that applies to your business, please contact our office to discuss your circumstances.
This item appeared in the August 2018 newsletter. It was written by Peter Gill.
