Base Rate Entity (Australian Small Business) - definition & overview
Contents
What's a 'Base Rate Entity'?
A base rate entity is a designation for a company in Australia that qualifies for a lower company tax rate of 25%. Small businesses with aggregated turnover less than $50 million for the previous income year are eligible.
What benefits to Base Rate Entities get?
- Tax Benefit: Base rate entities pay company tax at a rate of 25% (as of May 2024). This is lower than the standard company tax rate of 30%.
What's the eligibility criteria to become a Base Rate Entity?
A company qualifies as a base rate entity if it meets both of the following conditions:
- Turnover Threshold: The company's aggregated turnover for the previous income year is less than $50 million. Aggregated turnover considers the combined income of the company and any entities it's connected to.
- Income Type: 80% or less of your assessable income is base rate entity passive income (for example interest, dividends or rent)
Summary
For an Australian small business, being a base rate entity offers a tax advantage. However, companies need to consider both their turnover and the source of their income to determine eligibility.
Additional Notes
- The Australian Taxation Office (ATO) website provides detailed information on base rate entities, including how to determine your company's eligibility https://www.ato.gov.au/tax-rates-and-codes/company-tax-rate-changes.
- It's important to consult with a registered tax agent or accountant for specific advice regarding your business's tax situation.
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