The Government released exposure draft legislation Monday 18.9.2017 proposing to exclude corporate tax entities from qualifying for the lower small business company tax rate if 80% or more of the entity's assessable income is passive income . The Minister for Revenue said the Government's decision to cut the tax rate to 27.5% for small companies was not meant to apply to passive investment companies. The Draft Bill seeks to clarify that corporate tax entities with predominantly passive income (such as rent, dividends, interest and capital gains) cannot access the lower corporate tax rate, before 2023-24 when the 27.5% tax rate is proposed to apply all companies.
The Draft Bill proposes to ensure that a corporate tax entity (a base rate entity) will only qualify for the lower corporate tax rate of 27.5% if:
- the corporate tax entity carries on a business in the income year;
- the aggregated turnover of the corporate tax entity for the income year is less than the aggregated turnover threshold for that income year; and
- the corporate tax entity does not have "base rate passive income" for that income year of 80% or more of its assessable income for that income year.
DATE OF EFFECT: The amendments will broadly commence on 1 July 2016 and apply to the 2016-17 income year and later years of income.
SUBMISSIONS are due by 29 September 2017.
