Australian companies generally pay tax at either 25% or 30%.
The 25% rate applies to companies that qualify as base rate entities. Broadly, that means aggregated turnover of less than $50 million and no more than 80% of assessable income being base rate entity passive income, such as certain dividends, interest, rent, royalties or net capital gains.
For many trading businesses, the answer is straightforward. It can become less obvious where the company earns significant passive income or where related entities need to be included in aggregated turnover. The tests apply each income year, so a company that qualified for the 25% rate last year should not automatically assume the same rate applies this year.
This article contains general information only and isn’t personal tax advice. Speak with a registered tax agent or accountant to confirm your company’s base rate entity status for a specific income year.
| Company tax rate | Applies when | Quick test |
|---|---|---|
| 25% | The company is a base rate entity | Aggregated turnover under $50 million and BREPI no more than 80% |
| 30% | The company is not a base rate entity | One or both base rate entity tests is not met |
Key takeaways
- Two rates exist: 25% for base rate entities, 30% for everything else. Both apply to taxable income, not turnover.
- Base rate entity status needs two tests met every year — aggregated turnover under $50 million, and no more than 80% of assessable income as passive income (BREPI).
- Aggregated turnover includes connected entities and affiliates, so a modest standalone revenue figure doesn’t guarantee the turnover test is passed.
- The passive income test catches profitable, low-turnover companies that hold investments — certain dividends, rent and interest can push a small company over 80% in a given year.
- There’s no election or application — the applicable rate follows from whether the company satisfies both tests for that year.
- The small business income tax offset doesn’t apply to companies — that mechanism is for individuals earning business income as sole traders, partners or beneficiaries.
- Turnover and taxable income are different figures used for different purposes — don’t conflate the eligibility test with the amount the rate is applied to.
On this page
- The two company tax rates
- What makes a company a base rate entity
- The aggregated turnover test
- The passive income test
- What counts as base rate entity passive income
- Why a profitable company can still pay 30%
- This isn’t a small business concession you apply for
- How the rate feeds into franking
- Turnover, passive income and taxable income aren’t the same thing
- Checking your company’s status each year
- Getting help
The two company tax rates
A company in Australia pays tax at 25% if it’s a base rate entity, and 30% otherwise. Both rates apply to the company’s taxable income for the year — assessable income after allowable deductions — not to its turnover, its gross profit, or its cash in the bank.
This is unlike a personal marginal tax scale, where the rate steps up as income rises. A company either meets the base rate entity tests for the year or it doesn’t, and the single rate that applies is used across the whole of its taxable income for that year.
What makes a company a base rate entity
A company is a base rate entity for an income year if it passes two separate tests for that year:
- Aggregated turnover under $50 million.
- No more than 80% of assessable income is base rate entity passive income (BREPI).
A company that qualified as a base rate entity last year doesn’t carry that status forward automatically. Its position is reassessed against both tests when the return is prepared.
The aggregated turnover test
Aggregated turnover is the company’s own annual turnover, plus the annual turnover of any entities connected with it and any affiliates, with dealings between those entities removed so the same revenue isn’t counted more than once. Connection generally turns on control of roughly 40% or more.
| Included in aggregated turnover | Example |
|---|---|
| The company’s own turnover | Revenue from trading activities |
| Connected entities | A related company or trust the business controls, or is controlled by |
| Affiliates | An entity that acts, or could reasonably be expected to act, in accordance with the company’s directions |
| Excluded: intercompany dealings | Revenue from one grouped entity selling to another is netted out, not double-counted |
This can be easy to miss in smaller company groups. A company with modest revenue of its own can still exceed $50 million once a related trading entity or a connected property-holding entity is included. That can happen even if the related entity operates in a completely different part of the business.
The passive income test
The second test looks at the composition of the company’s assessable income for the year, not its size. No more than 80% of assessable income can be base rate entity passive income.
This test is applied year by year, and a company’s income mix can shift enough between years to change the outcome. A trading company that also holds a rental property, for example, might pass the test in a strong trading year and fail it in a quiet one where rent makes up a larger share of a smaller total.
What counts as base rate entity passive income
| Income type | Counts as BREPI? |
|---|---|
| Corporate distributions (excluding non-portfolio dividends) and relevant attached franking credits | Generally yes |
| Royalties | Yes |
| Rent | Yes |
| Interest (with some exceptions) | Generally yes |
| Net capital gains | Yes |
| Gains on qualifying securities | Yes |
| Partnership or trust distributions traceable to any of the above | Yes — retains its passive character when it flows through |
| Trading income from goods or services sold | No |
Income doesn’t lose its passive character just because it’s paid to the company through a partnership or trust rather than received directly. For example, a company that holds an investment property through a unit trust and receives its share of the trust’s rental income still has that income counted as BREPI.
Why a profitable company can still pay 30%
The two tests operate independently. For smaller companies, the passive income test is often the part that changes the outcome. A company well under the $50 million turnover threshold can still be taxed at 30% despite being profitable if most of that year’s income came from certain dividends, rent or interest rather than trading.
This can happen when a company holds an investment alongside an operating business — a rental property, a share portfolio, or a passive stake in another entity. In a year where trading income is lower than usual, the passive income can make up a larger share of the total even without the passive income itself increasing.
This isn’t a small business concession you apply for
Some small business tax concessions require an election, a threshold you opt into, or a separate claim on the return. The base rate entity rate isn’t one of those. There’s no election and no application — the rate that applies to a given year is simply whichever one the two tests produce, checked as part of preparing that year’s return.
It’s also a different mechanism from the small business income tax offset, which reduces tax payable for individuals — sole traders, and partners or beneficiaries receiving business income through a partnership or trust. That offset doesn’t apply to companies at all. For a company, the benefit is reflected in the applicable company tax rate rather than through a separate offset.
How the rate feeds into franking
A company’s tax rate also affects the franking credits it can attach to dividends paid to shareholders. The rules use the company’s corporate tax rate for imputation purposes, and that can require a separate check where the company’s status changes between years. If your company pays franked dividends and its base rate entity status has changed recently, ask your tax agent or accountant to confirm the applicable franking rate.
Turnover, passive income and taxable income aren’t the same thing
These three figures get used in the same conversation and are easy to blur together, but they do different jobs.
| Term | What it’s used for | Example |
|---|---|---|
| Aggregated turnover | Tests eligibility for the 25% rate ($50 million threshold) | Gross trading revenue, including grouped entities |
| Base rate entity passive income | Tests the composition of assessable income (80% threshold) | Certain dividends, rent, interest, royalties, net capital gains |
| Taxable income | The figure the 25% or 30% rate is actually applied to | Assessable income after allowable deductions |
A company can have a large turnover figure and a much smaller taxable income once deductions are applied, and the rate that applies to that smaller taxable income figure is decided by the separate turnover and passive income tests above, not by the taxable income number itself. Our guide to what taxable income actually means covers how assessable income and deductions combine to produce that figure.
Checking your company’s status each year
Because both tests are checked annually and depend on figures — turnover across a group of entities, and the mix of income for the year — that generally aren’t obvious until the accounts are largely finalised, base rate entity status is usually confirmed as part of preparing the tax return, not assumed in advance from the prior year’s outcome.
Our business tax return checklist covers the base rate entity check alongside the other concessions worth confirming before a company return is lodged, and our guide to company tax return due dates covers when that return is actually due.
Getting help
For smaller companies, the passive income test is often the part that changes the outcome, especially when a business holds an investment alongside its trading activity. Connected entities can also affect the turnover test, so last year’s rate shouldn’t be assumed to carry forward.
Our tax accountant and small business accounting pages cover how we handle company tax returns, including confirming base rate entity status before lodgment.
Not sure whether your company qualifies for the 25% rate?
We’ll check your aggregated turnover, your income mix and confirm the correct rate before your return is lodged.
Official resources
Frequently asked questions
What is the company tax rate in Australia?
There are two rates. A base rate entity pays 25%. A company that isn't a base rate entity pays 30%. Both rates apply to the company's taxable income, not its turnover or its profit before other adjustments. Most small and medium trading companies qualify for the 25% rate, but the test has to be checked every year rather than assumed to continue automatically.
What makes a company a base rate entity?
Two tests, both of which must be met for the income year. First, the company's aggregated turnover has to be under $50 million. Second, no more than 80% of its assessable income can be base rate entity passive income — things like certain dividends, interest, rent, royalties and net capital gains. A company can trade well under the turnover threshold and still fail the second test if too much of its income for that particular year is passive.
Is the 25% company tax rate a small business concession?
No. There's no election, application or separate registration — the company qualifies for the rate that follows from the two base rate entity tests for that year.
What counts as base rate entity passive income (BREPI)?
Corporate distributions other than non-portfolio dividends, along with relevant attached franking credits, royalties, rent, most interest income, gains on qualifying securities, net capital gains, and partnership or trust distributions that are traceable back to any of those categories. A distribution keeps its passive character even after it's passed through a partnership or trust to the company, which catches out companies that hold investments through a trust structure.
How is aggregated turnover calculated?
It's the company's own annual turnover plus the annual turnover of any entities connected with it or that are its affiliates, with dealings between those entities removed so the same revenue isn't counted twice. Connection generally turns on control of around 40% or more. This means a company with modest revenue of its own can still be pushed over the $50 million threshold if it's grouped with related entities, even where those entities operate in a completely different part of the business.
Can a profitable company still fail to qualify for the 25% rate?
Yes, most commonly through the passive income test rather than the turnover test. A company that is well under $50 million in aggregated turnover but earns most of its income for the year from rent, certain dividends or interest — for example, a company holding an investment property or a share portfolio rather than actively trading — can fail the 80% passive income test and pay 30% even though its turnover is modest.
Does the small business income tax offset apply to companies?
No. The small business income tax offset applies to individuals — sole traders, and partners or beneficiaries who receive business income through a partnership or trust — not to companies. A company's equivalent mechanism is the base rate entity test itself, which sets its tax rate rather than offsetting tax already calculated at the individual rate.
Is taxable income the same as turnover for working out the company tax rate?
No, and the two are easy to conflate because both get discussed in the same breath. Turnover is gross business revenue and is used only to test whether the $50 million aggregated turnover threshold is met. The tax rate that results — 25% or 30% — is then applied to the company's taxable income, which is assessable income after allowable deductions, a much smaller figure than turnover for most companies. Our guide to what taxable income actually means covers the calculation in full.
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