The Government has released exposure draft legislation to deny access to the lower corporate tax rate of 27.5% (down from 30%) for companies with predominantly passive income.
Under the changes, companies will qualify for the lower tax rate only if:
- Their passive income is less than 80% of their assessable income for the year;
- They “carry on a business” in that year; and
- They come below the aggregated turnover threshold for the year ($25 million for 2017–2018). These changes will apply from 1 July 2017. Due to the confusion surrounding the previous legislation, the Government has accepted that passive investment companies will be able to claim the 27.5% rate for 2016 and 2017.
For more information concerning the tax cut off, please contact Custom Accounting.