Company Tax Rates in Australia: 2026-27 Guide

Australia has two company tax rates, and the difference between them is real money. A company on the lower rate pays 25% on its profit. A company on the higher rate pays 30%. On $200,000 of taxable income that gap is $10,000 in a single year. Knowing which rate applies to your company, and why, is worth getting right.

This guide explains the two company tax rates, the tests that decide which one you pay, and the points where small businesses most often trip up. It is written for company directors and small business owners across Brisbane and Logan.

The two company tax rates

There are two rates set out in law:

• 25% for a company that is a base rate entity
• 30% for every other company

Company tax is paid on taxable income, not on turnover. Taxable income is your assessable income minus your allowable deductions. You work out the taxable income first, then apply the rate.

The rate is not something you choose. It is decided each income year by whether your company meets the base rate entity tests below.

What makes a company a base rate entity

A company qualifies for the 25% rate in an income year if it meets both of these conditions:

1. Its aggregated turnover is less than $50 million. Aggregated turnover includes the turnover of connected entities and affiliates, not just the one company.
2. No more than 80% of its assessable income is base rate entity passive income. Passive income includes things like interest, dividends, rent, royalties and net capital gains.

Both tests have to be met. A company under the turnover threshold that earns most of its income passively, for example a company that mainly holds investments, will not get the lower rate. That second test exists specifically to stop passive investment companies accessing the small business rate.

For most trading small businesses, a plumbing company, a shopfit business, a consultancy, the answer is the 25% rate, because turnover is well under $50 million and income is active rather than passive. The test still needs checking each year, because turnover and income mix can change.

Franking dividends at the right rate

There is a catch that catches out a lot of directors who pay themselves dividends. The rate you use to frank a dividend is worked out on a slightly different basis to the rate you pay on profit. In short, to work out your franking rate for a year you assume your aggregated turnover is the same as the previous year, along with the passive income test.

Get this wrong and you can over-frank or under-frank a dividend, which creates problems for both the company and the shareholder. If you pay franked dividends, this is a point worth checking with your accountant rather than assuming the franking rate matches the rate you paid on profit.

How company tax is paid through the year

Company tax is not usually paid in one hit after year end and when you file your Company Tax Return. Most companies pay it in advance through PAYG instalments across the year, based on their expected income. The instalments are then reconciled against the actual tax bill when the company return is lodged.

This matters for cash flow. A company that has a strong year will often find its instalments were set on a weaker prior year, leaving a balance to pay at lodgement. Planning for that gap is part of running the numbers properly, not a surprise to be dealt with in the moment.

What this means for you

Three things are worth doing each year:

• Confirm your base rate entity status rather than assuming last year’s rate still applies. Turnover grows and income mixes shift.
• If you pay dividends, check the franking rate separately from the rate you pay on profit.
• Keep an eye on PAYG instalments against your actual result, so a strong year does not become a cash flow problem at lodgement.

Company tax sits on top of your bookkeeping. If the underlying records are clean and the turnover and income figures are accurate through the year, the return is straightforward and the rate question answers itself. Where the records are patchy, the rate question becomes guesswork.

If you run a company and want your bookkeeping and company return handled by one team that keeps the figures aligned all year, speak to a tax professional about your specific situation. Call ABBS Tax on 1300 022 270.