The federal government has introduced legislation to restrict real estate investment companies from qualifying for the lower corporate tax rate of 27.5% from the 2017/18 tax year if more than 80% of their income consists of rent or other passive investment income.

Real estate investment companies

This test is in addition to meeting the turnover test to qualify for the tax rate cut.

The passive income test is in line with the federal government’s desire to restrict the tax rate cut to companies with income from an “active” business.

Source: CHH Tax Week Issue 49