Companies that are residents of Australia are subject to Australian income tax on their worldwide income. Generally, non-resident companies are subject to Australian income tax on Australian-sourced income only. However, where a company is resident in a country with which Australia has concluded a double taxation agreement (DTA), Australia's right to tax business profits is generally limited to profits attributable to a permanent establishment (PE) in Australia.
All companies are subject to a federal tax rate of 30% on their taxable income, except for ‘small business’ companies, which are subject to a reduced tax rate of 27.5% up to and including the 2023/24 income year, after which the rate will progressively reduce to 25% for the 2026/27 and later income years. The reduced tax rate applies only to those companies that, together with certain 'connected' entities, fall below certain aggregated turnover thresholds. For the 2017/18 year, the aggregated turnover threshold is AUD 25 million, and for the 2018/19 and later income years, it is AUD 50 million. The 27.5% rate for ‘small business’ entities subsequently will be reduced to:
- 27% for the 2024/25 income year
- 26% for the 2025/26 income year, and
- 25% for the 2026/27 and later income years.
Integrity measures also ensure that, from 1 July 2017, a company will not qualify for the reduced rate unless the passive income (including interest, rents, and net capital gains) that it derives represents no more than 80% of its total assessable income for the year.
The Australian government has abandoned its proposal to progressively reduce the corporate tax rate to 25% for all entities, not just those noted above, by the 2026/27 income year.
Local income taxes
There are no state or municipal taxes on income in Australia.