The Coalition government’s plan to bring the corporate tax rate down to 25% from 30% will take ten years.
Smaller and smaller rates will apply to small business over years while at the same time expanding the definition of what is a small business, bring lower tax to more.
This chart shows the progression to 2026-27:
The first to benefit will be small businesses with turnover of less than $10 million. For them the tax rate goes to 27.5%, a further cut from last year’s new small business rate of 28.5%.
The $10 million threshold is a significant increase on the current level of $2 million.
Treasurer Scott Morrison says this will deliver a lower tax rate for 870,000 companies employing 3.4 million workers.
Over ten years the tax rate for all companies will fall to 25%.
“This will make Australian companies more internationally competitive in a tough global market place,” Morrison says.
“This means higher living standards for Australians and an expected permanent increase in the size of the economy of just over 1% in the long term.”
Below are the further benefits, applying from July, for those companies with a turnover of less than $10 million a year. Most of these applied to small businesses turning over $2 million a year previously.
- Immediate tax deductibility for asset purchases costing less than $20,000.
- Simplified trading stock rules, giving them the option to avoid end of year stocktake if the value of their stock has changed by less than $5,000.
- A simplified method of paying PAYG tax instalments calculated by the ATO, which removes the risk of under or over estimating PAYG instalments and the resulting penalties.
- Other tax concessions currently available to small businesses, such as fringe benefits tax (FBT).
- A trial of simpler business activity statements (BAS), reducing GST compliance costs.