On Thursday 8.2.18, the House of Representatives passed the Treasury Laws Amendment (Enterprise Tax Plan No 2) Bill 2017, without amendment, and the Bill now moves to the Senate. The Bill provides for the remaining 8 years of the Government’s plan to reduce tax rates down, so that all companies pay tax at a 25% (instead of the old 30% rate).
The background to this ‘No. 2’ bill is that the original Bill proposed a 10 year reduction for all corporate entities to a 25% rate. The Senate, however, amended the Bill, to only allow the rate to be reduced to 27.5% and then only to companies with a turnover of up to $50 million (rising to that number in the 2018-19 financial year – next year). The Government accepted these changes in early 2017, to provide relief to at least some Australian companies. It then introduced this ‘No. 2’ Bill, in May 2017, to put the remainder of its 2016/17 Budget announcement, back to the Parliament. Since then the Bill has had 8 days of ‘second reading debates’, starting on 11.9.2017, and ending on 8.2.18. This has been a mammoth effort, even to this point.
The first part of the reduction, is to provide the 27.5% lower rate, to companies with progressively bigger and bigger turnovers, until there is no limit on the turnover, and the 27.5% rate applies to all companies. The turnover threshold progression would be as follows.
- for the 2019-20 income year – a $100 million turnover limit;
- for the 2020-21 income year – a $250 million turnover limit;
- for the 2021-22 income year – a $500 million turnover limit;
- for the 2022-23 income year – a $1 billion million turnover limit;
- for the 2023-24 income year – no turnover limit (by which time, the 27.5% rate will apply to all companies).
The second part of the reduction, is the steps in which the rates (for all companies) would step down to 25%. The years, and rates, would be as follows.
- for the 2024-25 income year — a 27% corporate tax rate;
- for the 2025-26 income year — a 26% corporate tax rate; and
- for the 2026-27 and subsequent income years — a 25% corporate tax rate.
Study Questions (answers below*)
- Does this No. 2 Bill re-introduce the last 8 years, of the Governments proposed 10 year plan, to reduce the company tax rate, to 25% for all companies?
- Is the increase, to a $50m turnover limit, in the 2018-19 financial year, already law?
- Are the steps, by which the turnover limits would increase: $100m; $500m; $1b, starting in the 2019-20 financial year?
- Would the first rate reduction (for all companies) be a 0.5% percentage point reduction, from 27.5% to 27.0%?
- Would the rate then reduce (for all companies) by 1.0% percentage point, each year (to 26% and 25%) – ending in the year 2027-18?