Company tax rate in Australia: What your business pays

Published 24 July 2026

Table of contents

• What is the company tax rate in Australia?
• How company tax rates have changed
• Who qualifies for the 25 percent base rate entity?
• Small business tax concessions linked to company tax
• How do you calculate company tax?
• When do you lodge and pay company tax?
• Simplify company tax with Xero
• FAQs on company tax rate

Key takeaways

• Australia has two company tax rates: 25% for eligible base rate entities and 30% for all other companies, with the rate you pay determined by your aggregated turnover and passive income each year.
• To qualify for the lower 25% company tax rate, your aggregated turnover must be below $50 million and no more than 80% of your assessable income can come from passive sources like interest, dividends, rent, or capital gains.
• Calculate your company tax by working out your taxable income and confirming your base rate entity status for the year, then apply the correct rate and factor in franking credits and PAYG instalments to arrive at your final tax position.
• Plan your cash flow around company tax by reviewing PAYG instalment schedules, checking key lodgment dates through the ATO or your registered agent, and keeping accurate records of turnover and passive income throughout the year.

What is the company tax rate in Australia?

Australian companies pay tax on their profits at one of two rates set by the Australian Taxation Office, or ATO. From the 2021 – 2022 income year onwards, companies that are base rate entities must apply the 25% company tax rate. The full company tax rate of 30% applies to all companies that are not eligible for the lower company tax rate. The rate that applies to your business depends on two key tests: your aggregated turnover and the proportion of your income that comes from passive sources.

Understanding which Australian company tax rate applies to your company each income year helps you plan tax, manage pay as you go (PAYG) instalments, and calculate franking credits when you pay dividends to shareholders. The rate can change from year to year if your turnover or income mix changes, so review your position annually. You must also assess your eligibility for the lower rate every year, meaning even if you qualified as a base rate entity last year, you need to check again for the current year. Getting this right ensures you pay the correct amount of tax and avoid unexpected adjustments or penalties.Explore this guide to calculating goods and services tax (GST) to understand how different taxes interact with your business finances.

How company tax rates have changed

Australia's company tax rates have changed over time. The current 2-tier system, with 25% for base rate entities and 30% for all other companies, reflects a phased reduction that began in 2015 (28.5% tax rate) and reached its current structure in the 2021 – 2022 income year, which still applies today.

The table below shows how rates have changed for base rate entities over recent income years.

The reduction was part of a broader government policy to lower the tax burden on smaller, actively trading companies. The $50 million aggregated turnover threshold for base rate entity eligibility has applied since the 2018 – 2019 income year, replacing the earlier $25 million threshold. For the full year-by-year breakdown, refer to the ATO's company tax rates page.

Who qualifies for the 25 percent base rate entity?

To access the 25% company tax rate, your company must qualify as a base rate entity for the income year. A company is a base rate entity for an income year if its aggregated turnover is less than the relevant threshold and 80% or less of its assessable income is base rate entity passive income. Both tests must be satisfied in the same income year for the lower rate to apply.

The first test looks at your aggregated turnover

Your company's aggregated turnover must be below $50 million for the income year. This figure includes not just your company's own turnover, but also the turnover of any connected entities or affiliates. You only qualify for the base rate entity concession if your aggregated turnover stays below this threshold, regardless of your passive income position.

The second test examines assessable income from passive sources

No more than 80% of your company's assessable income can be base rate entity passive income.

Otherwise, you'll pay the 30% company tax rate instead.

Meeting both tests means you're a base rate entity and can apply the lower rate when calculating your tax liability. If you don't meet both tests, the standard 30% rate applies for that year. Review your position early in the year and again before lodgment to confirm which rate you'll use.

How do you calculate aggregated turnover?

Aggregated turnover is the total ordinary income your company earns from all sources, plus the ordinary income of any entities connected with you or your affiliates. This is a group-wide measure, not just your company's standalone revenue.

When calculating aggregated turnover, you include:

• your company's ordinary income from business activities
• turnover of entities you control or that control you (connected entities)
• turnover of entities that act in accordance with your directions or wishes (affiliates) turnover of entities connected with your affiliates

You generally exclude certain amounts, such as:

• transactions between connected entities (to avoid double-counting)
• amounts that are not ordinary income (like capital receipts)
• income from sources the ATO specifically excludes under the rules

The ATO provides detailed guidance on working out your aggregated turnover, including how to identify connected entities and affiliates. It's important to apply these rules correctly, as underestimating your aggregated turnover can lead to using the wrong tax rate and potential adjustments.

Calculating income for the base rate entity passive income test

The passive income test measures how much of your company's assessable income comes from passive sources. To qualify for the 25% company tax rate, 80% or less of your assessable income can be base rate entity passive income.

Passive income typically includes interest income from:

• bank accounts
• loans, or bonds
• dividends from shares in other companies
• rent and rental-related income from property
• net capital gains from the sale of assets
• royalties and certain licensing income
• annuities and similar income streams

Active income, by contrast, includes trading revenue, service fees, and income from business operations. If your company earns most of its income from providing goods or services, you're more likely to pass the passive income test.

For example, if your company has $100,000 in assessable income and $85,000 comes from rental properties and dividends, you've failed the passive income test (85% passive). You would pay 30% company tax that year. If only $70,000 came from passive sources, you'd pass the test and qualify for the 25% rate.

The ATO publishes specific guidance on base rate entity passive income to help you classify your income correctly. Review this guidance each year, as the mix of income your business earns can change.

Small business tax concessions linked to company tax

Qualifying as a base rate entity often means your company also qualifies for a range of other small business tax concessions. These concessions are separate from your tax rate, but they can reduce the amount of tax you pay or simplify how you manage certain tax obligations.

The most commonly used concessions for eligible companies include:

• Instant asset write-off so you can immediately deduct the cost of eligible depreciating assets up to the relevant threshold, instead of spreading deductions over several years
• Simplified depreciation rules that pool most depreciating assets and write them off at a single rate, which reduces the complexity of depreciation calculations
• Immediate deduction for certain prepaid business expenses so you can claim a deduction in the year you pay them
• Reduced record-keeping requirements with simplified options for certain transactions, which lowers your administrative workload

Eligibility thresholds and conditions for each concession can differ from the base rate entity tests, so check the ATO's small business tax concessions guidance to confirm what applies to your company.

How do you calculate company tax?

You can calculate your company tax by following a simple set of steps. This helps you apply the right rate, claim eligible deductions, and take account of credits and instalments.

1. Work out taxable income

Begin with your accounting profit for the year and adjust it to arrive at taxable income. This means adding back any non-deductible expenses (like entertainment, fines, or private use of assets) and accounting for timing differences between accounting and tax rules. You'll also claim allowable deductions, such as operating expenses, depreciation, and interest, apply any tax losses carried forward from previous years, and adjust for items that are assessable for tax but not recorded as accounting income.

The result is your taxable income, the figure to which you'll apply the company tax rate. Accurate record-keeping throughout the year makes this step much easier, and many businesses use accounting software to track deductible expenses and generate tax-ready reports. For sole traders, the process differs. Learn more about sole trader tax obligations to understand how individual tax rates apply.

2. Check base rate entity status

Once you know your taxable income, confirm whether your company qualifies as a base rate entity for the income year. Review your aggregated turnover and calculate the proportion of your assessable income that is passive. Document your basis for the rate you'll apply, which might include a turnover calculation showing you're under $50 million, a breakdown of assessable income by category (active vs passive), and notes on connected entities or affiliates included in your turnover.

If you meet both tests, you can apply the 25% company tax rate. If you fail either test, you'll apply the 30% rate. Recording your reasoning each year creates a clear audit trail and helps you track changes in your status over time.

3. Apply 25% or 30%

Apply the correct company tax rate to your taxable income to calculate your tax liability before credits.

• If you're a base rate entity, multiply your taxable income by 0.25
• If not, multiply by 0.30

For example, with taxable income of $200,000, a base rate entity would pay $50,000 tax ($200,000 × 0.25), while a non-base rate entity would pay $60,000 ($200,000 × 0.30).

The rate you use also determines your franking credit cap. Companies taxed at 25% can frank dividends at 25%, while companies taxed at 30% frank at 30%. This alignment ensures shareholders receive the correct franking credits when you distribute profits.

4. Factor in franking and PAYG

Once you've calculated your tax liability, factor in any franking credits attached to dividends your company received during the year. These credits reduce the tax you owe, as they represent tax already paid by the companies that distributed the dividends to you. Next, account for any PAYG instalments you've paid throughout the year. PAYG instalments are regular payments you make to the ATO based on your expected tax liability. These instalments are credited against your final tax bill.

The final calculation includes tax on taxable income (from step 3), less franking credits received, less PAYG instalments paid, which equals your balance payable (or refundable). If the result is positive, you'll have a balance to pay when you lodge your return. If negative, you'll receive a refund. Understanding this flow helps you manage cash flow and avoid surprises at tax time.

When do you lodge and pay company tax?

Companies in Australia lodge an annual company tax return and pay any balance owing by specific dates set by the ATO. The timing depends on whether you lodge directly with the ATO or through a registered tax agent. Generally, the lodgment and payment date for small companies is 28 February, but if there are any prior year returns outstanding, the due date becomes 31 October. If you use a registered tax agent, you'll have access to extended lodgment dates, often into the following May or later, depending on the agent's lodgment program.

PAYG instalments spread your tax payments across the year, reducing the lump sum due at lodgment. Most companies pay instalments quarterly, though some smaller businesses may pay annually. The ATO calculates your instalments based on your previous year's tax or your expected current-year tax, and you can vary these if your circumstances change.

What are the key dates for companies?

The key dates for company tax depend on your lodgment method and your company's balance date. For a 30 June year-end, self-lodgers have their return and payment due 28 February, while agent-lodged returns have extended dates per the ATO lodgment program, often April–May. If your company has a substituted accounting period (a year-end other than 30 June), your dates will differ. Check the ATO website or speak with your accountant to confirm the exact dates that apply to your situation.

PAYG instalment due dates are typically:

• Quarter 1 (July–September): due 28 October
• Quarter 2 (October–December): due 28 February
• Quarter 3 (January–March): due 28 April
• Quarter 4 (April–June): due 28 July

Meeting these dates is important to avoid penalties and interest. Setting up calendar reminders or working with your accountant can help you stay on track.

How do PAYG instalments work?

PAYG instalments are regular payments you make toward your expected annual tax liability. The ATO offers several methods for calculating instalments:

• Instalment amount: The ATO tells you how much to pay each quarter based on your last tax return.
• Instalment rate: You apply a rate (set by the ATO) to your actual business and investment income for the quarter.
• Varied estimate: You estimate your total tax for the year and pay instalments based on that estimate.

Most companies start with the instalment amount method. If your income is steady, this works well. If your income fluctuates or you expect a significant change in profit, you can switch to the instalment rate method or vary your instalments to match your actual position. Varying your instalments can smooth cash flow when profits drop, but if you underestimate and pay too little, you may face penalties. Review your instalments each quarter and adjust as needed to stay aligned with your actual tax position.

For more on managing tax obligations, see this guide to fringe benefits tax to understand other tax responsibilities your business may have.

Simplify company tax with Xero

Managing Australian company tax becomes more straightforward when your financial records are accurate, up to date, and easy to access. Xero's cloud accounting platform gives you tools to track income, monitor turnover, and generate tax-ready reports so you can confirm your base rate entity status and calculate your tax liability with confidence.

Ready to simplify reconciling, record-keeping, and report building? Get one month free.

FAQs on company tax rate

Understanding company tax rates and how they apply to your business can raise many questions. This section addresses common queries about the company tax rate in Australia, helping you clarify eligibility, calculations, and related tax obligations.

How much company tax does a company pay on $100,000 profit?

On $100,000 of taxable income, a base rate entity pays $25,000 in tax and a non-base rate entity pays $30,000, before credits. Your final bill may be lower once you apply franking credits and pay as you go (PAYG) instalments.

Does the small business income tax offset apply to companies?

The small business income tax offset only applies to individuals, such as sole traders and partners in a partnership. Companies instead benefit from concessional rates through the base rate entity rules.

Is it better to be a sole trader or company for tax purposes?

The better option depends on your income level, business goals, and personal circumstances, because companies use company tax rates and sole traders use individual tax rates. Talk to your accountant so you can compare the after-tax outcome for each structure.

Is GST included in company tax?

Goods and services tax (GST) and company tax are separate obligations. You calculate company tax on your taxable income after you account for GST on your Business Activity Statements (BAS), as explained in this helpful guide on GST.