What You Need to Know About Australia Corporate Tax

If your company's aggregated turnover is under $50 million, you qualify as a base rate entity and pay 25% instead of the standard 30% rate, a meaningful difference that puts thousands back into your business each year. Australia's dividend imputation system (franking credits) adds another layer of planning when distributing profits to shareholders. This guide covers the rates, lodgement deadlines, and PAYG instalment obligations you need to manage.

1. What is corporate tax?

Corporate tax (also called company income tax) is the tax that Australian companies pay on their taxable income. It is administered by the Australian Taxation Office (ATO) and applies to all company profits, including trading income, investment income, and capital gains.

The current corporate tax rates are:

Base rate entities: 25% for companies with aggregated turnover under $50 million and no more than 80% of assessable income from passive sources
Standard rate: 30% for all other companies

Australia also has a dividend imputation system (franking credits) that helps avoid double taxation of company profits distributed to shareholders.

2. Who does it apply to?

This usually applies to:

All Australian resident companies (including proprietary companies and public companies)
Foreign companies with a permanent establishment in Australia
Corporate trustees of trusts
Companies registered with ASIC (Australian Securities and Investments Commission)
Subsidiary companies and corporate groups

Note: Sole traders and partnerships do not pay company tax. Their business income is reported on personal tax returns.

3. Why does it matter?

Understanding corporate tax helps you:

Stay compliant with the ATO and avoid penalties
Avoid interest charges on late payments and lodgements
Keep proper records and supporting documentation
File and pay correctly by your company's due date
Plan your cash flow better by managing franking credits and tax instalments

4. How does it work?

Here's the basic process:

Register your company with ASIC and obtain an ABN and Tax File Number (TFN)
Keep accurate financial records throughout the income year (1 July to 30 June)
Prepare financial statements at year-end
Calculate taxable income (assessable income minus allowable deductions)
Lodge your company tax return with the ATO
Pay any tax owing or receive a refund
Manage your franking account to track tax paid on distributed profits

5. What forms are involved?

Company Tax Return - The main annual return lodged with the ATO to report your company's taxable income and calculate tax payable
BAS (Business Activity Statement) - Used to report and pay PAYG income tax instalments throughout the year (quarterly or monthly)
Franking Account Return - Required if your company has made franking debits or credits during the year, or has a franking deficit at 30 June
Annual Investment Income Report (AIIR) - Required if your company pays interest or dividends to Australian residents
Schedule 25A (Losses Schedule) - Required if your company has prior year losses to carry forward

6. What information do you need?

Before handling corporate tax, make sure you have:

Company ABN and TFN
Audited or reviewed financial statements (if required)
Records of all assessable income and deductions
Depreciation schedules for company assets
Details of franking credits attached to dividends received and paid
Records of any capital gains or losses
PAYG instalment activity statement history
Details of related party transactions and transfer pricing (if applicable)

7. Important deadlines

Filing frequency: Annually, for the income year ending 30 June
Self-lodger deadline: 31 October following the end of the income year (for companies that lodge their own return)
Tax agent deadline: Varies, typically February to May the following year (depending on your agent's lodgement schedule)
Payment deadline: Generally due by the lodgement due date, but PAYG instalments are paid quarterly throughout the year
PAYG instalments: Quarterly with your BAS (due 28 days after each quarter)

For example, for the 2025-26 income year ending 30 June 2026:

Self-lodger deadline: 31 October 2026
Tax agent deadline: Varies (check with your agent)

8. Common mistakes to avoid

Not making PAYG instalment payments throughout the year and facing a large tax bill at year-end
Failing to lodge on time, even if no tax is owing (penalties apply)
Not maintaining a proper franking account and over-franking dividends
Overlooking the base rate entity rules and applying the wrong tax rate
Forgetting to carry forward prior year tax losses correctly
Not claiming all allowable deductions (instant asset write-off for small businesses, for example)
Ignoring thin capitalisation rules for companies with foreign debt
Not lodging a franking account return when required

9. Simple example

You run a small proprietary company in Melbourne with an aggregated turnover of $800,000 (a base rate entity).

Total assessable income: $800,000
Allowable deductions: $600,000
Taxable income: $200,000

Company tax (base rate entity at 25%):

Tax payable: $200,000 x 25% = $50,000

If you paid $12,500 in quarterly PAYG instalments during the year:

Remaining tax owing at lodgement: $50,000 - $12,500 = $37,500

If your company distributes a $100,000 franked dividend to shareholders:

Franking credit attached: $100,000 x 25/75 = $33,333
Shareholders receive the dividend and can use the franking credit to offset their personal tax

10. FAQ

Q: Am I a base rate entity? A: Your company is a base rate entity if your aggregated turnover is less than $50 million and no more than 80% of your assessable income is base rate entity passive income (such as interest, rent, royalties, and capital gains).

Q: What are PAYG instalments? A: PAYG (Pay As You Go) instalments are prepayments of your expected annual income tax. They are paid quarterly through your BAS and credited against your final tax bill when you lodge your company tax return.

Q: How do franking credits work? A: When your company pays tax on its profits, it generates franking credits. When you distribute dividends to shareholders, you can attach these credits to the dividends. Shareholders then use the credits to reduce their personal tax.

Q: Can I carry forward company losses? A: Yes. Tax losses can be carried forward indefinitely to offset future taxable income, provided your company meets the continuity of ownership test or the same business test.

Q: What happens if I lodge my company tax return late? A: The ATO charges a failure-to-lodge penalty of one penalty unit ($313) for each 28-day period the return is overdue, up to a maximum of 5 penalty units ($1,565). Interest also applies to any unpaid tax.

11. Final takeaway

Australian company tax is 25% for base rate entities (turnover under $50 million) and 30% for other companies. Lodge your return by 31 October (or your tax agent's deadline), pay PAYG instalments throughout the year, and manage your franking account when distributing dividends.

Caption

What you need to know about Australia corporate tax: The base rate is 25% for smaller companies and 30% for larger ones. Lodge annually with the ATO and use franking credits to reduce double taxation on dividends.

Sign-up CTA

Want to simplify your tax compliance? Sign up for HeadOffice FREE and manage your business taxes with confidence.