Each new financial year, there will be changes introduced by the Australian Tax Office that affect individuals and businesses in many different ways. Last year, there were a whole host of changes that caused a bit of chaos – thankfully, settled down now and all under control. In the next few weeks however, there are some more changes coming – from July 1 – and while there aren’t many, they will be quite significant for businesses at a certain growth stage.
The definition of small business (in terms of revenue) has changed, and the company tax rate has gone down for small businesses – which for most businesses, is good news!
As part of the Enterprise Tax Plan 2016, the ATO outlines the following:
“The corporate tax rate is reduced from 28.5% to 27.5% for the 2016–17 income year for small business entities. The aggregated turnover threshold to qualify as a small business has been increased from $2 million to $10 million.
In 2017–18 the threshold increases from $10 million to $25 million and in 2018–19 to $50 million. From 2017–18, corporate entities eligible for the lower tax rate will be known as base rate entities, i.e. the small business definition will remain at $10 million from 2017–18 onwards while the base rate entity threshold will continue to rise.”