Aussie SMEs earning up to $50 million a year will enjoy a 26 per cent tax rate from Wednesday, with the government’s fast-tracked tax cuts for small companies due to come into effect on 1 July.
From Wednesday, the small business tax rate will be reduced from 27.5 per cent to 26 per cent for businesses with a turnover of less than $50 million, before dropping further to 25 per cent from the 2021–22 income year.
Established while Malcolm Turnbull was still prime minister, the government’s original tax cut plan was supposed to drop the corporate tax rate for SMEs with annual turnovers of up to $50 million from 30 per cent to 25 per cent over a 10-year period, with the first drop to 27.5 per cent coming into effect on 1 July 2018, and reducing gradually to 25 per cent by 2026–27.
However, after the industry had lobbied for the government to bring forward the enterprise tax cut, the Morrison government announced in 2018, as part of the election pitch, that it would introduce legislation to bring the tax rate down to 25 per cent for businesses with an annual turnover below $50 million — five years earlier than the former plan. The full company tax rate of 30 per cent applies to all companies that are not eligible for the lower company tax rate.
From Wednesday, the small business tax rate will be reduced from 27.5 per cent to 26 per cent for businesses with a turnover of less than $50 million, before dropping further to 25 per cent from the 2021–22 income year.
In a statement accompanying the tax rate cut in 2018, Prime Minister Scott Morrison and Treasurer Josh Frydenberg said the change “will help to ensure Australian businesses are competitive to protect our economy and jobs”.