- Company tax rates for 2025-26
- How the rate has changed
- The two tests for a base rate entity
- What counts as passive income
- The ATO's examples
- How to check your company's rate this year
- Why the passive income test catches people out
- A quick checklist for directors
- Not-for-profit companies
- The verdict
- Frequently asked questions
Australia has two main company tax rates for 2025-26: 25% for base rate entities and 30% for every other company. A company is a base rate entity if its aggregated turnover is under $50 million and no more than 80% of its assessable income is passive income such as interest, rent, dividends or a net capital gain, as of October 2026.
The test is applied fresh every income year, using that year's actual turnover. The ATO is explicit that last year's turnover, or an estimate, is irrelevant. Everything below comes from the ATO's company tax rate pages.
Company tax rates for 2025-26
| Company type | Rate |
|---|---|
| Base rate entity | 25% |
| All other companies | 30% |
The same rates apply to corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts. Special rates apply to life insurance companies, credit unions, pooled development funds and not-for-profit companies, and in-scope multinational groups can owe top-up tax under the global minimum tax rules if their effective rate falls below 15% in a country.
How the rate has changed
| Income year | Turnover threshold | Base rate entities | Other companies |
|---|---|---|---|
| 2017-18 | $25m | 27.5% | 30% |
| 2018-19 to 2019-20 | $50m | 27.5% | 30% |
| 2021-22 and later | $50m | 25% | 30% |
The rate for base rate entities stepped down to 25% from the 2021-22 income year and has stayed there. If you're amending an older return, use the rate for that year, not today's.
The two tests for a base rate entity
- Aggregated turnover for the income year is less than the $50 million threshold.
- Base rate entity passive income is 80% or less of assessable income for that year.
Since 2017-18 this passive income test replaced the old requirement to be 'carrying on a business', and being a small business entity no longer decides the rate either. For a multinational, aggregated turnover includes the turnover of affiliates and connected entities, even if they're foreign residents.
What counts as passive income
- Corporate distributions (dividends) and the franking credits on them.
- Royalties and rent.
- Interest income, with some exceptions.
- Gains on qualifying securities.
- A net capital gain.
- Amounts flowing to the company as a partner or trust beneficiary, to the extent they trace back to any of the above.
The ATO's examples
| Company | Passive income share | Rate |
|---|---|---|
| Happy Feet Pty Ltd: online sock seller with $4,000 term deposit interest on $104,000 assessable income | 3.8% | 25% |
| Coffee and Cake Pty Ltd: cafe receiving $200,000 rent through a trust on $700,000 assessable income | 28.6% | 25% |
| Best Equity Pty Ltd: listed investment company, all interest and dividends | 100% | 30% |
| SoftDev Pty Ltd: software firm that sold its own office for an $850,000 net capital gain on $1 million assessable income | 85% | 30% |
SoftDev is the one to study. It's an ordinary trading business, but selling its office building in a year when trading income was only $150,000 pushed passive income to 85%, so it paid 30% that year. A one-off capital gain can flip a small company onto the higher rate, so time big asset sales with that in mind.
How to check your company's rate this year
- Work out aggregated turnover for this income year only, including connected entities and affiliates.
- Check it's under $50 million.
- Total your assessable income and the part that's base rate entity passive income.
- Divide passive by total. At 80% or less, you're a base rate entity on 25%.
- If either test fails, the 30% rate applies for that year. Recheck next year from scratch.
If you've just set up, you'll also need an ABN and to understand your BAS obligations, which sit alongside company tax. Asset purchases can also change your taxable income through the instant asset write-off.
Why the passive income test catches people out
Plenty of small companies hold assets that earn passive income without thinking of themselves as investors. The ATO's own examples show the range: interest on cash set aside for expansion, rent paid through a family trust that owns the premises, and a capital gain on selling the company's own office. Each one counts as base rate entity passive income, however ordinary the business behind it.
The two examples that stay on 25% have one thing in common: trading income is most of the total. Happy Feet's interest is a rounding error next to its sales, and even Coffee and Cake's large rental income is well under the 80% line because the cafe trades strongly. Best Equity and SoftDev fail for opposite reasons: one is built on passive income, the other had one unusual year.
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A quick checklist for directors
- Use actual turnover for the year you're assessing, never last year's or a forecast.
- Include connected entities and affiliates in aggregated turnover, including overseas ones.
- List every passive stream: dividends with their franking credits, interest, rent, royalties, capital gains and trust or partnership distributions that trace back to them.
- Re-run the test in any year you sell a major asset.
- Keep the workings with the company tax return in case the ATO asks, so the rate you used is easy to back up.
Not-for-profit companies
Not-for-profit companies pay nothing on taxable income up to $416. Between $417 and $915 (or $762 for a base rate entity), they're taxed at a shading-in rate on the amount above $416. Above those levels, all taxable income is taxed at the normal 30% or 25%.
The verdict
Most trading small businesses are on 25%, but don't assume it. Run the two tests every year, and be most careful in years with a big capital gain, a lot of rent or a cash pile earning interest, because those are the years a small company quietly moves to 30%.
Frequently asked questions
What is the company tax rate in Australia?
25% for base rate entities and 30% for other companies in 2025-26, as of October 2026.
What is a base rate entity?
A company with aggregated turnover under $50 million and 80% or less of its assessable income from passive sources.
Does the 25% rate depend on last year's turnover?
No. The ATO says only that income year's actual turnover counts, not a previous year's or an estimate.
Can a capital gain change a company's tax rate?
Yes. A net capital gain is passive income, so a large one can push passive income above 80% and the rate up to 30% for that year.
