Small Business Tax Rates Update

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Warning – Tax Cuts Ahead

Important update from the Team here at CFD Advisors & Accountants.

The Government has previously indicated its plan to reduce the corporate Tax rates to 25% for all qualifying small businesses. This is a positive move to improve the domestic and international competitiveness of Australia in this global economy. The table below details the rate changes between 2016 – 2027.

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From the 2016–17 income year, the qualifying small business tax rate has also been reduced to 27.5%.

This lower rate must be applied by qualifying small businesses with a turnover (aggregated turnover) less than $10 million that are:

  • companies
  • corporate unit trusts
  • public trading trusts.

The company tax rate will remain at 30% for all other entities that are not small business entities.

Dividends and Franking Credits

This is great news for growing businesses due to reduced PAYG Instalment requirements and lower tax liabilities which allows them to have more funds available for distribution.

We must consider the downfall that all tax savings achieved will be short lived if most profits are being paid out as dividends as the franking rate is also levelled at 27.5%. So, we need to be very careful not to over frank dividends to avoid any Franking deficit tax.

So how does this affect me and what do I need to do?

As part of our ongoing service to you we will ensure your current structure is optimised to catch the full benefit of this tax cut. We are always up to date with the most recent law changes so if you want to discuss how this affects your group please contact us so we can tailor specific advice for your situation.