Legislation Update

Company tax rate and SMEs: Enterprise Tax Plan Bill passes Senate with amendments


The Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 was passed by the Senate late on 31 March 2017 with 6 Government amendments as part of a last-minute compromise deal with crossbench Senators, primarily the Nick Xenophon Team (NXT). Of course, the Bill still needs to return to House of Reps for consideration of, and agreement to, the Senate’s amendments before they can become law. While Parliament has now adjourned until the Budget sittings on 9 May 2017, the Tax Office has informed the Treasurer that it was not necessary for the House of Reps to remain and agree to the amendments in order for it to implement the company tax rate changes determined by the Senate: see below.

Senate amendments

The effect of the Government’s amendments is that, instead of applying to all businesses, the reduced corporate tax rate of 27.5% will only apply to businesses with an aggregated turnover of less than $50m from the 2018-19 financial year onwards.

In the 2016-17 financial year, the reduced corporate tax rate of 27.5% will apply for businesses with an aggregated turnover of less than $10m; $25m turnover in 2017-18; and $50m turnover from 2018-19. This effectively implements the first 3 years of the Government’s 10-year plan for company tax cuts.

As per the trajectory in the Budget, the corporate tax rate will also be further reduced in stages, starting from 1 July 2024, so that it will eventually fall to 25% by the 2026-27 financial year for businesses with an aggregated turnover of less than $50m.

The company tax rate changes, as amended by the Senate, are summarised in the following table.

Financial yearAggregated turnover less thanCompany tax rate
2019-20 to 2023-24$50m27.5%

In an interview with ABC Insiders on 2 April 2017, the Treasurer also said that the Government remains committed to its 10-year plan to reduce the company tax rate to 25% for all companies.

ATO company tax instalment adjustments for June 2017 quarter: Treasurer

In a statement by the Treasurer on 31 March 2017, Mr Morrison said he has received advice from the Tax Office that it was not necessary for the House of Reps to remain in order for them to implement any changes that would be determined by the Senate in relation to the Enterprise Tax Plan.  According to the Treasurer, this is a fairly standard procedure and is often done, usually in terms of personal income tax cuts, where there is bipartisan support and the Tax Office is able to go about their business of putting those arrangements in place.

So, for any amendments that are passed in the Senate, the ATO advice says, “And the Treasurer makes announcements saying the Government will support those amendments to become law that will allow them to anticipate the rate cuts to become law. In accordance with standard practice, the law changes that are anticipated but not yet enacted, they would update their new legislation web page to indicate that fact, and that they would be anticipating changes for instalment purposes”.

The Treasurer said this would lead to final quarter adjustments to company tax instalments for the June 2017 quarter. The upshot of all of that is that any arrangements completed by the Senate would be able to be acted upon by the ATO, following a statement by the Treasurer, that the Government would be supporting those amendments. Mr Morrison said this process was anticipated – which meant the House of Reps didn’t need to remain to consider that matter.

Other small business tax measures

In addition to the reduced company tax rate, the Enterprise Tax Plan Bill, as passed, includes measures to:

  • increase the small business entity turnover to $10m from 1 July 2016;
  • increase the unincorporated small business tax discount from 5% to 10% over a 10-year period (although see below); and
  • enable small businesses with an aggregated turnover of less than $10m to access most small business tax concessions (except for the CGT concessions under Div 152 of the ITAA 1997). However, the threshold for accessing the small business income tax offset will be $5m (aggregated turnover).

To win the support of crossbench Senators to pass the Enterprise Tax Plan Bill, the Government has agreed to provide a one-off payment of $75 for single recipients and $125 for couples of the Aged Pension, the Disability Pension and the Parenting Payment, the Treasurer said.

by Stuart Jones