On the last sitting day and just prior to the leadership spill the Senate passed amendments to the company tax rate and franking rate rules applying from the 2018 income year onwards.
Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018 also introduces a passive income test which is designed to ensure that the lower company tax rate is not available to companies if more than 80% of total assessable income for the year is passive in nature (as defined in the rules). In tandem with the legislation, the ATO released draft guidance on how to apply the passive income test in a range of practical situations.
If any 2018 company tax returns have already been lodged, then it will be necessary to consider whether these changes could impact on the tax rate that applies. This could also impact on the franking rate that applies to dividends already paid by companies in the 2018 income year – again this is an issue that will need to be revisited.
Join Michael Carruthers (Tax Director, Knowledge Shop) and Lisa Armstrong (MD, Knowledge Shop), for just the juicy bits of change for accountants and advisers:
- 2018 income year corporate tax rate and franking rate changes (Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018) - the new passive income test and the guidance from the ATO (LCR 2018/D7 Base rate entities and base rate entity passive income)
- How the new safe harbour works for sales of inherited dwellings (Safe harbour for sales of inherited dwellings)
- The power of resolutions - what happens when a trustee resolves to distribute franking credits to certain beneficiaries of the trust separately from, and in different proportions to, the income comprising the underlying franked dividends? We explore the implications of the Federal Commissioner of Taxation v Thomas  HCA 31.