Company Tax Rates in Australia 2026: 25% vs 30%, and How Company Tax Actually Works

Unlike individuals, companies in Australia do not have a sliding scale of tax brackets or a tax-free threshold. There are just two flat rates, and your company pays one of them on every dollar of taxable income.

For the 2025-26 income year the rates are:

• 25% if your company is a 'base rate entity' (a smaller, mainly active-trading business)
• 30% for every other company (the 'full' company tax rate)

Because there is no tax-free threshold, a base rate entity with $10,000 of taxable income pays $2,500, and a company on the full rate pays $3,000. Taxable income is your assessable income minus allowable deductions, not your total turnover, so the rate applies to profit, not revenue.

These two rates have been in place unchanged since the 2021-22 income year. No change has been legislated for 2025-26, but tax rates can be amended by Parliament, so confirm the current figure at the ATO before you rely on it.

The 25% rate is not automatic for small businesses. Your company is a base rate entity for an income year only if it passes both of these tests for that same year:

• Aggregated turnover test: the company's aggregated turnover for the year is under $50 million. Aggregated turnover includes the turnover of connected entities and affiliates, not just your single company.
• Passive income test: no more than 80% of the company's assessable income is 'base rate entity passive income'.

Both tests are assessed each year on that year's figures. The ATO notes that a prior year's turnover is irrelevant when working out the rate for the current year, so a company's rate can change from one year to the next as its income mix or turnover changes.

If your company fails either test, it pays the full 30% rate for that year. A common trap flagged by the ATO is forgetting that net capital gains and certain rent, interest and dividend income count as passive income and can tip a company over the 80% line.

The 80% test trips up a lot of otherwise-active businesses, so it is worth knowing exactly what the ATO treats as 'base rate entity passive income'. It is assessable income that includes:

• Corporate distributions (dividends, other than non-portfolio dividends) and franking credits attached to them
• Non-share dividends
• Interest, or payments in the nature of interest (with limited exceptions)
• Royalties and rent
• Gains on qualifying securities
• Net capital gains
• Amounts flowing to the company as a partner in a partnership or a beneficiary of a trust, to the extent they trace back to any of the above

The ATO specifically warns that net capital gains count as passive income even where the asset sold was an active business asset. So a profitable trading company that sells a major asset, or that earns significant rent or interest in a year, can unexpectedly breach the 80% threshold and lose the 25% rate for that year.

This is one area where it is easy to get the rate wrong on a self-prepared return. If your company has a meaningful slice of investment, rent or one-off capital gains income, it is worth checking the mix carefully or getting a registered tax agent to confirm your status.

A company is a separate legal entity from the people who own and run it. The Australian Securities and Investments Commission (ASIC) issues it a nine-digit Australian Company Number (ACN) when it is registered, and it has many of the same rights as a person: it can hold assets, incur debt, and sue or be sued in its own name.

Because it is a separate entity, the company lodges its own tax return and pays tax on its own taxable income at the company rate. This is different from a sole trader, whose business profit is simply taxed at their personal marginal rates. Company profits are taxed at the flat 25% or 30% rate regardless of how much profit the company makes.

Owners (shareholders) and directors are taxed separately on what they personally take out, for example salary, director's fees or dividends. Directors also carry legal obligations and can be held personally liable if they breach them, and the company must keep ASIC updated within 28 days of key changes to its details.

A company must register for GST once its turnover reaches $75,000, and it will generally also need an ABN, a tax file number for the company, and may need to register for PAYG withholding if it pays wages.

When a company pays tax on its profits and then distributes those profits as dividends, Australia's dividend imputation system stops the same profit being fully taxed twice. The company attaches 'franking credits' to the dividend representing tax it has already paid, and shareholders use those credits to reduce their own tax.

The rate your company pays is also its 'corporate tax rate for imputation purposes', which sets the maximum franking credit it can attach. A company on 25% franks dividends at a lower credit rate than a company on 30%, because it has paid less tax on the underlying profit.

This creates a practical wrinkle: a company's rate can move between 25% and 30% from year to year, but its franking account reflects the rate actually paid in each year. Getting the imputation rate wrong can lead to over-franking tax, so the ATO publishes a specific formula for the maximum franking credit.

For shareholders, the franking credit is added to their assessable income (the 'gross-up') and then claimed back as an offset, so fully franked dividends from a profitable Australian company are not taxed twice at the same rate.

Every company must lodge an annual company tax return reporting its taxable income, offsets, credits, PAYG instalments and the tax payable or refundable. The due date depends on the size and lodgement history of the company.

• Most small companies: lodge and pay by 28 February following the end of the income year.
• A company with a prior-year return still outstanding: the due date is generally 31 October.
• Large and medium taxpayers (broadly, more than $2 million total income in the prior year): earlier dates apply, with payment for taxable large/medium taxpayers due as early as 1 December.

Many companies pay their tax in advance through PAYG instalments rather than in one lump sum. A company is automatically entered into the PAYG instalments system if it has instalment income of $2 million or more, estimated (notional) tax of $500 or more, or is the head company of a consolidated group. Instalments are usually paid quarterly and credited against the final assessment.

Lodgement programs and exact due dates are updated every year and differ for tax-agent-lodged returns, so check the current ATO dates, or your agent's lodgement program, rather than assuming last year's date still applies.

Taxable not-for-profit (NFP) companies are treated differently from ordinary companies at the bottom end. An NFP company pays no tax on the first $416 of taxable income. Above $416, a shade-in rate of 55% of the excess applies until the tax payable effectively equals the normal company rate, at which point the ordinary 25% or 30% rate takes over.

An NFP company with taxable income of $416 or less can lodge a non-lodgment advice instead of a full return. Taxable income is rounded down to the nearest dollar. Many NFP clubs and associations also apply the mutuality principle, under which receipts from dealings with their own members are not assessable income.

Other entity types, such as life insurance companies, registered organisations, credit unions and pooled development funds, can have their own specific rates or rules that sit outside the standard 25%/30% structure. If your entity is one of these, the standard rates above may not apply.

Because thresholds, shade-in rates and special-entity rules can change, and because getting the base rate entity status or franking rate wrong has real consequences, confirm the figures at the ATO and consider using a registered tax agent. By law, only a registered tax agent can charge to prepare and lodge a company tax return, and you can verify anyone you engage on the Tax Practitioners Board register before handing over your books.