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5 Tax and Structures

Company taxation

Australian companies generally have a flat tax rate of 30% of net income. However, this is reduced to 26% for small business companies (known as base rate entities) with aggregated turnover of less than $50 million for the 2020/21 financial year. Tax rates for small business companies will reduce to 25% in 2021/22.

Unlike individuals, companies have no tax-free threshold and there is not a marginal tax rate. Companies are also not eligible to the tax offsets that individuals have an entitlement to.

In addition, companies don't benefit from any discount in capital gains they make from investments. 

Assume your Company XYZ Pty Ltd has business revenue of $400,000, expenses of $280,000 and a capital gain of $40,000 on shares it sold. It qualifies as a small business. 

The taxable income for Company XYZ is calculated in the table opposite.

Tax is then assessed at 26% of $160,000, which is $41,600.

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