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Australia Corporate Tax Guide

Australian corporate income tax for the 2025-26 income year. The guide covers: the company tax rates — the Australian corporate tax rate is either 25% or 30%, depending on whether the company is a "base rate entity" (the "BRE"); the base rate entity is a company with the aggregated turnover below $50 million AND the passive income below 80% of the assessable income; the base rate entities pay the corporate tax at the rate of 25% (reduced from 27.5% for the 2020-21 year and earlier); the other companies (the turnover above $50 million OR the passive income above 80%) pay the corporate tax at the rate of 30%; the dividend imputation (franking) system — Australia operates the full imputation system (the "dividend imputation" or the "franking system"); the Australian company pays the corporate tax on the profits (the "franking credits" are created at the rate of the corporate tax paid); the company can attach the franking credits to the dividends paid to the shareholders (the "franked dividends"); the shareholders include the franking credits in the assessable income and receive the credit for the corporate tax already paid; the excess franking credits are refundable to the individuals and the superannuation funds (but NOT to the companies); the franking account — the company maintains the franking account (the "franking account") to track the franking credits created (when the company pays the tax) and the franking debits arising (when the company pays the franked dividends); the company can issue the "franking credits" up to the balance of the franking account; the company that pays the dividends with the franking credits in excess of the franking account balance is subject to the "franking deficit tax" at the rate of 30%; the PAYG instalments (the "Pay As You Go instalments") — the companies must pay the PAYG instalments quarterly (the "quarterly PAYG instalments") based on the estimated tax liability; the company can use the "GDP-adjusted notional tax" method (the default method) or the "estimated tax" method; the company can also pay the PAYG instalments annually (the "annual PAYG instalment") if the turnover is below $10 million; the R&D tax incentive (the "Research and Development Tax Incentive") — the Australian R&D tax incentive provides the tax offset for the eligible R&D activities: (a) for the companies with the aggregated turnover below $20 million: the refundable tax offset at 43.5% of the eligible R&D expenditure (the company receives the cash refund if the offset exceeds the tax liability), (b) for the companies with the aggregated turnover above $20 million: the non-refundable tax offset at 38.5% of the eligible R&D expenditure (the offset can be carried forward to offset the future tax liability, subject to the $4 million R&D cap and the R&D intensity test); the instant asset write-off (the "temporary full expensing") — the temporary full expensing (the "instant asset write-off") was extended to the 2024-25 income year; the assets costing less than $20,000 (the "instant asset write-off" threshold) can be immediately deducted; the assets costing $20,000 or more are depreciated over the effective life (the "prime cost" or the "declining value" method); the capital gains tax (CGT) for the companies — the companies do NOT benefit from the 50% CGT discount (the CGT discount applies to the individuals and the superannuation funds only); the companies pay the corporate tax on the net capital gains at the company tax rate (25% or 30%); the small business CGT concessions (the "15-year exemption", the "50% active asset reduction", the "retirement exemption" up to $500,000, the "rollover") are available to the companies that meet the "small business entity" test (the aggregated turnover below $10 million or the net asset value below $6 million); the corporate tax return (the "company tax return") — the company must lodge the annual company tax return (the "tax return for companies" — the form "Company Tax Return 2025") with the ATO by the 15 May 2026 (for the 2024-25 income year, if the company is on the standard 30 June balance date and uses a tax agent); the company must also lodge the "taxable payments report" (the "TPAR") for the construction industry, the cleaning, the courier, the security, the information technology, and the road freight industries. All amounts in Australian Dollars (AUD). For related reading, see our Personal Tax Guide → and GST Guide →.

Base Rate Entity Test

  • Turnover test: The aggregated turnover must be below $50 million (the "aggregated turnover" includes the turnover of the company and the connected entities — the affiliates and the subsidiaries). The turnover is the "ordinary income" (the income from the ordinary business activities) of the income year.
  • Passive income test: The passive income must be below 80% of the assessable income. The passive income includes: (a) the dividends and the non-share dividends, (b) the interest and the non-share dividends, (c) the royalties, (d) the rent (unless the rent is from the active business activities), (e) the net capital gains, (f) the foreign exchange gains. The company that fails the passive income test is taxed at the 30% rate regardless of the turnover.

For the franking credits and the dividend imputation, see our Personal Tax Guide →. For the R&D tax incentive registration (the "R&D application" with AusIndustry), see the ATO website.

Dividend Imputation

  • Franking credits: The franking credit is attached to the dividend at the rate of the corporate tax paid. The maximum franking credit is calculated as: (the dividend amount) x (the corporate tax rate) / (1 — the corporate tax rate). The base rate entity (25%) can issue the franking credits at the rate of 25%. The company that pays the tax at 30% can issue the franking credits at the rate of 30%.
  • Refundable excess: The individuals and the superannuation funds receive the refund of the excess franking credits (the "excess franking credits are refundable"). The companies and the other non-individual entities do NOT receive the refund (the excess franking credits are carried forward as the "franking credit carry-forward").

For the PAYG instalments and the company tax return lodgement, see our Starting a Business Guide →.

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