Base Rate Entity (Australian Small Business)
A base rate entity is a designation for a company in Australia that qualifies for a lower company tax rate of 25%. Small businesses with aggregated turnover less than $50 million for the previous income year are eligible.
Contents
What's a Base Rate Entity?
- Tax Benefit: Base rate entities pay company tax at a rate of 25% (as of May 2024). This is lower than the standard company tax rate of 30%.
- Eligibility Criteria: A company qualifies as a base rate entity if it meets both of the following conditions:
- Turnover Threshold: The company's aggregated turnover for the previous income year is less than $50 million. Aggregated turnover considers the combined income of the company and any entities it's connected to.
- Income Type: No more than 80% of the company's assessable income is classified as base rate entity passive income. This includes income from sources like dividends, interest (with some exceptions), rent, and royalties.
Summary
For an Australian small business, being a base rate entity offers a tax advantage. However, companies need to consider both their turnover and the source of their income to determine eligibility.
Additional Notes
- The Australian Taxation Office (ATO) website provides detailed information on base rate entities, including how to determine your company's eligibility https://www.ato.gov.au/tax-rates-and-codes/company-tax-rate-changes.
- It's important to consult with a registered tax agent or accountant for specific advice regarding your business's tax situation.
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