Australia has two company tax rates, and the difference between them is not just size. A tiny company with $200,000 of income can pay the full 30% rate if most of that income is interest, rent or dividends. And the rate your company pays tax at this year may not be the rate it can attach to the dividends it pays, because franking is worked out on last year's numbers.
This guide sets out the rates for 2026–27, the two tests that decide them, how franking works and where it goes wrong, how the company rate compares with personal and trust tax, and the one big change for companies this year: the return of loss carry-back.
What is the company tax rate in Australia for 2026–27?
| Company type | 2026–27 tax rate | Test |
|---|---|---|
| Base rate entity | 25% | Aggregated turnover under $50 million and 80% or less of assessable income is base rate entity passive income |
| All other companies | 30% | Fails either test |
These rates have applied since 2021–22. Here's how they got there:
| Income year | Turnover threshold for lower rate | Lower rate | Full rate |
|---|---|---|---|
| 2017–18 | $25 million | 27.5% | 30% |
| 2018–19 and 2019–20 | $50 million | 27.5% | 30% |
| 2020–21 | $50 million | 26% | 30% |
| 2021–22 onwards (including 2026–27) | $50 million | 25% | 30% |
What is a base rate entity?
A company is a base rate entity for an income year if both are true for that year:
- Aggregated turnover is under $50 million. Aggregated turnover includes the turnover of entities connected with the company or affiliated with it. Use the actual figure for the year, not an estimate or last year's.
- No more than 80% of its assessable income is base rate entity passive income.
What counts as passive income?
| Base rate entity passive income | Not passive |
|---|---|
| Dividends from other companies, and the franking credits on them | Income from trading: sales, fees, services |
| Interest (with some exceptions, such as for some financial businesses) | Business income received through a partnership or trust, to the extent it's traceable to trading income |
| Rent | |
| Royalties | |
| Gains on qualifying securities | |
| Net capital gains | |
| Partnership and trust distributions, to the extent they're traceable to any of the above |
The test looks at assessable income, not profit. A company with $1 million of trading sales and $150,000 of interest is fine. A company with $50,000 of consulting income and $250,000 of rent is not.
Key point: The 80% test is applied every year. A company that sells its trading business mid-year and invests the proceeds can tip over 80% passive in the very next year, and its rate jumps to 30%.
Worked examples: which rate applies?
Hypothetical, round numbers, 2026–27.
| Company | Income | Passive share | Rate |
|---|---|---|---|
| Trades business | $2.4m of contract income, $8,000 interest | Under 1% | 25% |
| Investment company | $180,000 of rent and $20,000 of dividends | 100% | 30% |
| Medical practice service company | $900,000 of service fees, $40,000 interest | About 4% | 25% |
| Bucket company receiving a share of a family trust's trading profit, plus interest on Division 7A loans | $150,000 trust distribution traceable to trading income, $12,000 interest | About 7% | 25% |
| Bucket company receiving a share of a family trust's rent and dividends | $150,000 trust distribution traceable to rent and dividends | 100% | 30% |
The two bucket company rows show why there's no single "bucket company tax rate". It depends on what the trust earned. If you run a trust-and-company structure, our bucket company guide explains how to plan for it.
What rate can my company frank dividends at?
Franking credits let shareholders claim credit for the tax the company has paid. The maximum franking credit on a dividend depends on the company's corporate tax rate for imputation purposes, and that rate is worked out by assuming this year's figures are the same as last year's.
- If last year's aggregated turnover was under $50 million and last year's passive income was 80% or less of assessable income, the company franks at 25% this year.
- Otherwise it franks at 30%.
- A company that didn't exist last year franks at 25%.
Where it goes wrong
| Last year | This year | What happens |
|---|---|---|
| Trading (25%) | Trading (25%) | Tax paid at 25%, franked at 25%. Fine |
| Trading (25%) | Mostly passive (30%) | Tax paid at 30%, but franked at only 25%. Credits build up in the franking account and can be used later, but this year's dividends carry less credit than the tax paid |
| Mostly passive (30%) | Trading (25%) | Tax paid at 25%, but dividends can be franked at 30%. Frank at the full 30% and the franking account can go into deficit, which means franking deficit tax at year end |
That last row is the one to watch. It typically happens when an investment company buys or starts a business, or when a bucket company's trust distributions change from passive to trading income.
Worked example: the franking trap
Hypothetical, round numbers.
A company held only shares and term deposits in 2025–26, so it paid tax at 30%. In 2026–27 it starts a consulting business and becomes a base rate entity, paying 25%. Its franking account opens 2026–27 with a $10,000 balance.
It earns $200,000 of taxable income in 2026–27, so its tax is $50,000 at 25%. By 30 June 2027 it has paid $35,000 of that through PAYG instalments; the rest will be paid after the return is assessed. In May 2027 it pays a $140,000 dividend and franks it at the 30% rate it's entitled to use, attaching $60,000 of franking credits.
| Franking account, 2026–27 | Amount |
|---|---|
| Opening balance | $10,000 |
| Tax instalments paid during the year | +$35,000 |
| Credits attached to the May dividend | −$60,000 |
| Balance at 30 June 2027 | −$15,000 |
That $15,000 deficit means franking deficit tax is payable shortly after year end. It can generally be credited against later income tax, but it's tax paid early, and the credit can be reduced if the deficit is large. Franking the dividend at 25%, or paying it after more tax had been paid, would have avoided it.
A franking account reconciliation before dividends are declared prevents this. Our franking account agent rebuilds the account from the company's history and flags a deficit before it happens; your accountant checks it before any dividend is declared.
How does the company tax rate compare with personal tax?
The company rate is lower than the top personal rate, which is why so many businesses operate through companies. But company tax isn't the end of the story. When profit is paid out as a dividend, the shareholder pays tax at their own rate and gets a credit for the company tax.
| Entity | 2026–27 rate on profit |
|---|---|
| Base rate entity company | 25% |
| Other company | 30% |
| Individual resident | Nil to $18,200; 15% to $45,000; 30% to $135,000; 37% to $190,000; 45% above, plus 2% Medicare levy |
| Trust | Taxed in beneficiaries' hands at their own rates; the trustee pays 47% on income nobody is entitled to |
Worked example: company tax is often a deferral, not a saving
Hypothetical, round numbers, 2026–27 resident rates.
A base rate entity company earns $200,000 of profit. It pays $50,000 in tax and pays the remaining $150,000 to its sole shareholder as a fully franked dividend. The shareholder has no other income.
| Amount | |
|---|---|
| Company tax at 25% | $50,000 |
| Shareholder's taxable income ($150,000 dividend + $50,000 franking credit) | $200,000 |
| Personal tax including 2% Medicare levy | $59,870 |
| Less franking credit | −$50,000 |
| Top-up tax paid by the shareholder | $9,870 |
| Total tax on the $200,000 | $59,870 |
That's the same tax the shareholder would have paid earning $200,000 personally. The company rate only saves tax permanently when profits are kept in the company and reinvested, or paid out over time to shareholders on lower rates. That's why structure matters more than the headline rate. Our sole trader vs company vs trust guide compares them properly.
And money taken out of a company any other way, as a "loan" or by paying private bills, can be taxed as an unfranked dividend with no credit for the company tax at all. See our Division 7A guide.
What changed for companies in 2026–27?
Tax loss carry-back is law
The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 brought back loss carry-back from 1 July 2026. In short:
- Who: corporate tax entities with aggregated turnover under $1 billion.
- What: a revenue loss for 2026–27 or a later year can be carried back against tax paid in either or both of the two previous income years.
- How: as a refundable tax offset, first claimable in 2026–27 company tax returns.
- Limit: the refund can't exceed the company's franking account balance.
For a small company that paid tax in 2024–25 and 2025–26 and makes a loss in 2026–27, that means cash back now instead of carrying the loss forward and waiting for profits. The franking account limit means a company that has paid out all its credits as dividends may get little or nothing.
A further set of loss reforms, proposed from 1 July 2028, is not yet law.
No change to the rates
The 25% and 30% rates and the $50 million threshold are unchanged for 2026–27.
Mistakes we see with company tax rates
- Assuming every small company pays 25%. Investment and bucket companies often pay 30%.
- Forgetting connected entities when measuring aggregated turnover against $50 million.
- Franking at this year's rate instead of the rate worked out from last year's figures.
- Paying dividends without checking the franking account, then paying franking deficit tax.
- Ignoring the passive income test after selling a business, when the company holds the sale proceeds.
- Treating the company rate as the final tax and leaving profits in the company without a plan to get them out.
- Missing the loss carry-back because the company's loss year return was prepared the old way.
How do you get profit out of a company tax-effectively?
The company rate only tells you what the company pays. What the owners pay depends on how money comes out. The main options, each with its own rules:
| Method | Deductible to the company? | Taxed to the owner | Watch out |
|---|---|---|---|
| Salary or director's fees | Yes | At personal rates, through PAYG withholding | Super guarantee applies under Payday Super; payroll tax if the group is over the state threshold |
| Franked dividend | No | At personal rates, with a credit for company tax | Franking rate and franking account balance (above) |
| Employer super contributions | Yes, when the fund receives them | 15% in the fund, within the concessional cap ($32,500 for 2026–27) | Excess contributions are taxed at personal rates |
| Repaying a loan the owner made to the company | No | Not taxed (it's the owner's own money) | Needs records showing the original loan |
| Complying Division 7A loan | No | Not taxed now, but must be repaid with interest at 8.77% for 2026–27 | A deferral, not a solution; repayments usually need dividends or salary to fund them |
| Paying private bills from the company account | No | As an unfranked deemed dividend, unless fixed by the lodgment day | The most expensive way to take money out |
For most owner-managed companies, the answer is a mix: a reasonable salary with super, franked dividends timed to the shareholders' tax brackets, and nothing taken informally. Where a family trust owns the shares, dividends can flow to the trust and be distributed, which adds flexibility and the integrity rules that come with it. Our family trust guide covers those.
How BPAG handles company tax
We prepare company tax returns as part of your plan, with the rate, franking rate and passive income tests checked each year. Our franking account agent reconciles or rebuilds the franking account and flags deficit tax risk. Our dividend statements agent prepares dividends with the right franking, the resolution and the statements. Your accountant reviews and signs off on every return, dividend and calculation. The agents draft; a person approves.
See our company tax return service and our pricing: company returns are included from our Compliance Essentials plan. If your structure needs rethinking, start with our business structures service. For a simple trading company with steady profits and one shareholder, the main job is getting profits out efficiently and on time, and that's usually more about salary, dividends and super than about the tax rate itself.
Frequently asked questions
Is the company tax rate going to change?
As at 18 October 2026 there's no legislated change to the 25% and 30% rates. Separately, a Bill introduced on 14 October 2026 proposes a 30% minimum tax on discretionary trusts from 1 July 2028. It isn't law, and it doesn't change company rates, but it would change the comparison between trusts and companies.
Does a new company pay 25% in its first year?
For its tax, a new company is a base rate entity if its turnover and passive income tests are met for that year. For franking, a company that didn't exist in the previous year is treated as a base rate entity, so its maximum franking rate in its first year is 25%.
Do companies get the small business income tax offset?
No. The small business income tax offset (up to $1,000) is for individuals with business income from a sole trader business, partnership or trust. Companies get the lower 25% rate instead, if they're base rate entities.
Does a company get the 50% CGT discount?
No. Companies have never been entitled to the CGT discount, so a company pays 25% or 30% on the full capital gain. Net capital gains also count as passive income for the base rate entity test. This is one reason investment assets with large expected gains are often held outside companies.
When does a company pay its tax?
Most small companies pay through PAYG instalments on their activity statements during the year, then the balance when the tax return is assessed. The return's due date depends on the company's size, its lodgment history and whether a tax agent lodges it, so check your agent's lodgment program.
Can a company carry back a loss in 2026–27?
Yes. Loss carry-back is law again: corporate tax entities with aggregated turnover under $1 billion can carry back a revenue loss from 2026–27 or later and offset it against tax paid in either or both of the two previous years, as a refundable offset. The refund is limited by the company's franking account balance.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.