Australian company income tax.
Company tax
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After-tax profit
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Two company tax rates, and which one is yours
Australia runs a flat company tax with two possible rates, not a progressive scale. Most small and medium companies pay 25 percent as a base rate entity. Everyone else pays the standard 30 percent. There is no tax-free threshold for companies, unlike individuals, so the first dollar of profit is taxed at the full rate. This calculator applies whichever rate fits your company and shows the tax and the profit left over. It is deliberately simple, because the rate itself is simple; the genuine complexity is qualifying for the lower rate and what happens when profits flow out to shareholders.
The base rate entity test
To pay 25 percent a company must clear two hurdles in the same year. Its aggregated turnover, counting connected and affiliated entities, must be under $50 million, and no more than 80 percent of its assessable income can be passive, meaning interest, dividends, rent, royalties and net capital gains. A trading business comfortably under $50 million almost always qualifies. A passive investment company that does little but collect rent and dividends usually does not, and pays 30 percent even if it is tiny. The 80 percent test catches people who assume small automatically means cheap.
A trading company on $500,000 profit
Take the default: a base rate entity with $500,000 of taxable profit. At 25 percent the company tax is $125,000, leaving $375,000 of after-tax profit. Note what would change if the same company failed the base rate test: at 30 percent the tax climbs to $150,000 and after-tax profit falls to $350,000, a $25,000 swing on identical earnings. The table tracks the qualifying case.
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The chart compares the two rates on the same $500,000, with the dark slice as tax and the teal slice as retained profit.
Company tax is rarely the final word
Here is the point owners most often miss: company tax is not the end of the story, because of dividend imputation. When the company pays its profit out to shareholders as a dividend, that dividend carries franking credits equal to the company tax already paid. The shareholder includes the grossed-up dividend in their personal return and gets a credit for the company tax, so the profit is ultimately taxed at the shareholder's marginal rate, not double-taxed. A retiree on a low rate can even receive a refund of franking credits. That is why the 25 versus 30 percent rate, while it affects cash flow and franking, does not change the eventual total tax for a fully distributing company nearly as much as the headline suggests. This tool is built for the director or bookkeeper sizing the company's own bill; pair it with the franking credits calculator to see the shareholder side.
A franking trap with the lower rate
Paying 25 percent has a subtle cost. The company can generally only frank dividends at the rate it expects to pay, so a base rate entity attaches franking credits at 25 percent. If profits were earned in an earlier year taxed at 30 percent but distributed now at the 25 percent franking rate, credits can become trapped in the franking account. Companies that move between the two rates should watch this, because over-franking and under-franking both carry consequences, and it is a recurring headache for growing businesses crossing the $50 million line.
Common questions
Do company losses carry forward?
Yes. Tax losses can be carried forward indefinitely and offset against future profits, provided the company satisfies either the continuity of ownership test or the similar business test. So a company that lost money early can shelter later profits, which this single-year calculator does not model. Enter the profit after any loss offset for a realistic figure.
Is the small business rate the same as the base rate entity rate?
They are now the same 25 percent, but the concept evolved. The label moved from small business entity to base rate entity, and the turnover threshold settled at $50 million with the added 80 percent passive income test. For a normal trading company under $50 million, the practical answer is 25 percent.
When is company tax actually due?
Most companies pay through PAYG instalments across the year based on the ATO's estimate, then settle any balance when the company tax return is lodged. Larger companies pay monthly instalments. So the $125,000 in the example is rarely paid in one hit; it is spread across quarterly or monthly prepayments.