Australia

A corporate tax rate of 27.5% applies to certain small business corporate tax entities with an aggregated turnover of less than 50 million Australian dollars (AUD) for the 2018/19 and 2019/20 income years, provided that the company does not derive substantial passive income. The 27.5% rate for these entities will reduce to 26% for the 2020/21 income year and then to 25% from the 2021/22 income year. The corporate tax rate for all other corporate tax entities remains at 30%. See the Taxes on corporate income section.

Reforms have been made to the Petroleum Resource Rent Tax (PRRT) regime with effect from 1 July 2019, where onshore oil and gas projects are removed from the PRRT regime. See the Other taxes section for more information.

A free trade agreement between Australia and Hong Kong entered into force on 17 January 2020, and a trade agreement with Peru entered into force on 11 February 2020. A free trade agreement negotiated with Indonesia is yet to enter into force. See the Other taxes section for more information.

For a business with a turnover of up to AUD 50 million, accelerated depreciation applies to certain depreciating assets with a cost of up to AUD 30,000 acquired and installed ready for use from 7.30pm (AEDT) 2 April 2019. As part of the Federal Government’s economic response to COVID-19, this concession has been temporarily expanded and enhanced for certain assets first used or installed ready for use from 12 March 2020. See the Deductions section for more information.

Access to company losses is now subject to a similar business test, which supplements the existing same business test loss integrity rules, for losses incurred in income years from 1 July 2015. See the Deductions section for more information.

The Australian government has implemented the Organisation for Economic Co-operation and Development (OECD) hybrid mismatch rules, which generally apply to income years commencing on or after 1 January 2019. See the Group taxation section for more information.

Legislation has been enacted in Australia to give effect to the double tax treaty signed by Australia and Israel on 28 March 2019, which, following its entry into force, will represent the first tax treaty between the two countries. See the Withholding taxes section for more information. 

Reforms have been made affecting certain foreign investors. These reforms, which broadly apply from 1 July 2019, subject to transitional relief, relate to limiting access to tax concessions for those foreign investors involved in stapled structure arrangements by increasing the managed investment trust (MIT) withholding rate on fund payments that are attributable to non-concessional MIT income to 30%, limiting the withholding tax (WHT) exemption for superannuation funds for foreign residents, and limiting access to tax concessions for certain sovereign entities. See the Withholding taxes section for more information. 

Changes to Australia’s thin capitalisation rules broadly operate to require that the values of assets used in the calculation are to be those reflected in financial statements, subject to certain transitional relief which ceased to apply for income years commencing on or after 1 July 2019. See the Group taxation section for more information. 

The OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS) has legal effect in relation to certain tax treaties in Australia from as early as 1 January 2019. See the Other issues section for more information.

New laws applicable from 1 July 2019 codify and limit the scope of the sovereign immunity tax exemption. See the Other issues section for more information.

Temporary economic stimulus measures introduced as part of the Federal Government’s economic response to COVID-19 include:

• JobKeeper wage subsidy and cash flow assistance for eligible businesses, as well as not-for-profits (NFPs), to help them stay in business and keep their employees in jobs. See the Tax credits and incentives section for more information.
• Supporting business capital investment through enhanced tax concessions. See the Deductions section for more information.
• Measures to support the flow of credit, such as a government guarantee of 50% to support new short-term unsecured loans to small and medium enterprises.
• Temporary relief for financially stressed business, including, among other measures, relief for directors from any personal liability for trading while insolvent.

COVID-19 has presented some specific tax challenges for businesses as they restrict employee movements and come to grips with the implications of an economic downturn. The Australian Taxation Office (ATO) has responded to many of these implications by providing targeted administrative concessions, relief, and guidance. For further detail, visit the ATO’s COVID-19 support page.