Federal Register of Legislation - Australian Government

Primary content

A Bill for an Act to amend the law relating to taxation, and for related purposes
Administered by: Treasury
For authoritative information on the progress of bills and on amendments proposed to them, please see the House of Representatives Votes and Proceedings, and the Journals of the Senate as available on the Parliament House website.
Registered 01 Sep 2016
Introduced HR 01 Sep 2016
Table of contents.

2016

 

The Parliament of the

Commonwealth of Australia

 

HOUSE OF REPRESENTATIVES

 

 

 

 

Presented and read a first time

 

 

 

 

Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016

 

No.      , 2016

 

(Treasury)

 

 

 

A Bill for an Act to amend the law relating to taxation, and for related purposes

  

  


Contents

1............ Short title............................................................................................. 1

2............ Commencement................................................................................... 1

3............ Schedules............................................................................................ 4

Schedule 1—Reducing the corporate tax rate                                                      5

Part 1—Amendments commencing 1 July 2016                                             5

Income Tax Rates Act 1986                                                                                        5

Part 2—Amendments commencing 1 July 2017                                             6

Income Tax Rates Act 1986                                                                                        6

Part 3—Amendments commencing 1 July 2018                                             8

Income Tax Rates Act 1986                                                                                        8

Part 4—Amendments commencing 1 July 2019                                             9

Income Tax Rates Act 1986                                                                                        9

Part 5—Amendments commencing 1 July 2020                                           10

Income Tax Rates Act 1986                                                                                      10

Part 6—Amendments commencing 1 July 2021                                           11

Income Tax Rates Act 1986                                                                                      11

Part 7—Amendments commencing 1 July 2022                                           12

Income Tax Rates Act 1986                                                                                      12

Part 8—Amendments commencing 1 July 2023                                           13

Income Tax Rates Act 1986                                                                                      13

Part 9—Amendments commencing 1 July 2024                                           15

Income Tax Rates Act 1986                                                                                      15

Part 10—Amendments commencing 1 July 2025                                         16

Income Tax Rates Act 1986                                                                                      16

Part 11—Amendments commencing 1 July 2026                                         17

Income Tax Rates Act 1986                                                                                      17

Part 12—Application of amendments                                                                18

Schedule 2—Amount of tax discount for unincorporated small businesses           20

Part 1—Amendments commencing 1 July 2016                                           20

Income Tax Assessment Act 1997                                                                            20

Part 2—Amendments commencing 1 July 2024                                           21

Income Tax Assessment Act 1997                                                                            21

Part 3—Amendments commencing 1 July 2025                                           22

Income Tax Assessment Act 1997                                                                            22

Part 4—Amendments commencing 1 July 2026                                           23

Income Tax Assessment Act 1997                                                                            23

Part 5—Application of amendments                                                                   24

Schedule 3—Access to small business concessions, etc.                                 25

Part 1—Amendments                                                                                                  25

Income Tax Assessment Act 1997                                                                            25

Part 2—Application of amendments                                                                   29

Schedule 4—Main consequential amendments relating to imputation 30

Part 1—Amendments commencing 1 July 2016                                           30

Income Tax Assessment Act 1997                                                                            30

Part 2—Amendments commencing 1 July 2023                                           36

Income Tax Assessment Act 1997                                                                            36

Part 3—Application of amendments                                                                   40

Schedule 5—Other consequential amendments                                                 41

Part 1—Amendments commencing 1 July 2016                                           41

Income Tax Assessment Act 1997                                                                            41

Part 2—Amendments commencing 1 July 2017                                           42

Income Tax Assessment Act 1997                                                                            42

Part 3—Amendments commencing 1 July 2023                                           43

Income Tax Assessment Act 1936                                                                            43

Income Tax Assessment Act 1997                                                                            43

Part 4—Amendments commencing 1 July 2024                                           46

Income Tax Assessment Act 1997                                                                            46

Part 5—Amendments commencing 1 July 2025                                           48

Income Tax Assessment Act 1997                                                                            48

Part 6—Amendments commencing 1 July 2026                                           50

Income Tax Assessment Act 1997                                                                            50

 

 


A Bill for an Act to amend the law relating to taxation, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act is the Treasury Laws Amendment (Enterprise Tax Plan) Act 2016.

2  Commencement

             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provisions

Commencement

Date/Details

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table

The day this Act receives the Royal Assent.

 

2.  Schedule 1, Part 1

1 July 2016.

1 July 2016

3.  Schedule 1, Part 2

1 July 2017.

1 July 2017

4.  Schedule 1, Part 3

1 July 2018.

1 July 2018

5.  Schedule 1, Part 4

1 July 2019.

1 July 2019

6.  Schedule 1, Part 5

1 July 2020.

1 July 2020

7.  Schedule 1, Part 6

1 July 2021.

1 July 2021

8.  Schedule 1, Part 7

1 July 2022.

1 July 2022

9.  Schedule 1, Part 8

1 July 2023.

1 July 2023

10.  Schedule 1, Part 9

1 July 2024.

1 July 2024

11.  Schedule 1, Part 10

1 July 2025.

1 July 2025

12.  Schedule 1, Part 11

1 July 2026.

1 July 2026

13.  Schedule 1, Part 12

The day this Act receives the Royal Assent.

 

14.  Schedule 2, Part 1

1 July 2016.

1 July 2016

15.  Schedule 2, Part 2

1 July 2024.

1 July 2024

16.  Schedule 2, Part 3

1 July 2025.

1 July 2025

17.  Schedule 2, Part 4

1 July 2026.

1 July 2026

18.  Schedule 2, Part 5

The day this Act receives the Royal Assent.

 

19.  Schedule 3, Part 1

1 July 2016.

1 July 2016

20.  Schedule 3, Part 2

The day this Act receives the Royal Assent.

 

21.  Schedule 4, Part 1

1 July 2016.

1 July 2016

22.  Schedule 4, Part 2

1 July 2023.

1 July 2023

23.  Schedule 4, Part 3

The day this Act receives the Royal Assent.

 

24.  Schedule 5, Part 1

1 July 2016.

1 July 2016

25.  Schedule 5, Part 2

1 July 2017.

1 July 2017

26.  Schedule 5, Part 3

1 July 2023.

1 July 2023

27.  Schedule 5, Part 4

1 July 2024.

1 July 2024

28.  Schedule 5, Part 5

1 July 2025.

1 July 2025

29.  Schedule 5, Part 6

1 July 2026.

1 July 2026

Note:          This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

             (2)  Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3  Schedules

                   Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1Reducing the corporate tax rate

Part 1Amendments commencing 1 July 2016

Income Tax Rates Act 1986

1  Paragraph 23(2)(a)

Omit “28.5%”, substitute “27.5%”.

2  Paragraph 23(3)(b)

Repeal the paragraph, substitute:

                     (b)  in respect of the standard component:

                              (i)  if the company is a small business entity for a year of income—27.5%; or

                             (ii)  otherwise—30%.

3  Paragraph 23(4)(c)

Repeal the paragraph, substitute:

                     (c)  in respect of so much of the taxable income as exceeds the PDF component:

                              (i)  if the company is a small business entity for a year of income—27.5%; or

                             (ii)  otherwise—30%.

4  Subparagraph 23(6)(b)(i)

Omit “$863”, substitute “$832”.

5  Paragraph 23(7)(a)

Omit “42.75%”, substitute “41.25%”.

6  Paragraph 25(a)

Omit “28.5%”, substitute “27.5%”.

Part 2Amendments commencing 1 July 2017

Income Tax Rates Act 1986

7  Subsection 3(1)

Insert:

base rate entity has the meaning given by section 23AA.

8  Paragraph 23(2)(a)

Omit “small business entity”, substitute “base rate entity”.

9  Subparagraph 23(3)(b)(i)

Omit “small business entity”, substitute “base rate entity”.

10  Subparagraph 23(4)(c)(i)

Omit “small business entity”, substitute “base rate entity”.

11  Subparagraph 23(6)(b)(i)

Omit “small business entity”, substitute “base rate entity”.

12  Paragraph 23(7)(a)

Omit “small business entity”, substitute “base rate entity”.

13  After section 23

Insert:

23AA  Meaning of base rate entity

                   An entity is a base rate entity for a year of income if:

                     (a)  it carries on a business (within the meaning of the Income Tax Assessment Act 1997) in the year of income; and

                     (b)  its aggregated turnover (within the meaning of that Act) for the year of income, worked out as at the end of that year, is less than $25 million.

14  Paragraph 25(a)

Omit “small business entity”, substitute “base rate entity”.

15  Paragraph 28A(a)

Omit “the rate specified in paragraph 23(2)(b) (about companies other than small business entities)”, substitute “the rate specified in paragraph 23(2)(b) of this Act”.

Part 3Amendments commencing 1 July 2018

Income Tax Rates Act 1986

16  Paragraph 23AA(b)

Omit “$25 million”, substitute “$50 million”.

Part 4Amendments commencing 1 July 2019

Income Tax Rates Act 1986

17  Paragraph 23AA(b)

Omit “$50 million”, substitute “$100 million”.

Part 5Amendments commencing 1 July 2020

Income Tax Rates Act 1986

18  Paragraph 23AA(b)

Omit “$100 million”, substitute “$250 million”.

Part 6Amendments commencing 1 July 2021

Income Tax Rates Act 1986

19  Paragraph 23AA(b)

Omit “$250 million”, substitute “$500 million”.

Part 7Amendments commencing 1 July 2022

Income Tax Rates Act 1986

20  Paragraph 23AA(b)

Omit “$500 million”, substitute “$1 billion”.

Part 8Amendments commencing 1 July 2023

Income Tax Rates Act 1986

21  Subsection 3(1) (definition of base rate entity)

Repeal the definition.

22  Subsection 12(10)

Omit “30%”, substitute “27.5%”.

23  Subsection 23(2)

Repeal the subsection, substitute:

             (2)  The rate of tax in respect of the taxable income of a company is 27.5%, if subsections (3) to (5) and section 23A do not apply to the company.

24  Paragraph 23(3)(b)

Repeal the paragraph, substitute:

                     (b)  in respect of the standard component—27.5%.

25  Paragraph 23(4)(c)

Repeal the paragraph, substitute:

                     (c)  in respect of so much of the taxable income as exceeds the PDF component—27.5%.

26  Paragraph 23(6)(b)

Repeal the paragraph, substitute:

                     (b)  the taxable income is not greater than $832.

27  Subsection 23(7)

Repeal the subsection, substitute:

             (7)  The amount of tax payable by a company (before applying any rebate, credit or other tax offset (within the meaning of the Income Tax Assessment Act 1997)) must not be greater than 41.25% of the amount by which the taxable income of the company exceeds $49,999, if the company is a recognised medium credit union in relation to the year of income.

28  Section 23AA

Repeal the section.

29  Paragraph 23A(a)

Omit “30%”, substitute “27.5%”.

30  Section 25

Repeal the section, substitute:

25  Rate of tax payable by trustees of public trading trusts

                   The rate of tax payable by a trustee of a public trading trust in respect of the net income of the public trading trust in respect of which the trustee is liable, under section 102S of the Assessment Act, to be assessed and to pay tax is 27.5%.

31  Paragraph 28(a)

Repeal the paragraph, substitute:

                     (a)  if paragraph 98(3)(b) of the Assessment Act (about beneficiaries that are companies) applies—the rate specified in subsection 23(2) of this Act; and

32  Paragraph 28A(a)

Omit “paragraph 23(2)(b)”, substitute “subsection 23(2)”.

Part 9Amendments commencing 1 July 2024

Income Tax Rates Act 1986

33  Subsection 12(10)

Omit “27.5%”, substitute “27%”.

34  Subsection 23(2)

Omit “27.5%”, substitute “27%”.

35  Paragraph 23(3)(b)

Omit “27.5%”, substitute “27%”.

36  Paragraph 23(4)(c)

Omit “27.5%”, substitute “27%”.

37  Paragraph 23(6)(b)

Omit “$832”, substitute “$817”.

38  Subsection 23(7)

Omit “41.25%”, substitute “40.5%”.

39  Paragraph 23A(a)

Omit “27.5%”, substitute “27%”.

40  Section 25

Omit “27.5%”, substitute “27%”.

Part 10Amendments commencing 1 July 2025

Income Tax Rates Act 1986

41  Subsection 12(10)

Omit “27%”, substitute “26%”.

42  Subsection 23(2)

Omit “27%”, substitute “26%”.

43  Paragraph 23(3)(b)

Omit “27%”, substitute “26%”.

44  Paragraph 23(4)(c)

Omit “27%”, substitute “26%”.

45  Paragraph 23(6)(b)

Omit “$817”, substitute “$788”.

46  Subsection 23(7)

Omit “40.5%”, substitute “39%”.

47  Paragraph 23A(a)

Omit “27%”, substitute “26%”.

48  Section 25

Omit “27%”, substitute “26%”.

Part 11Amendments commencing 1 July 2026

Income Tax Rates Act 1986

49  Subsection 12(10)

Omit “26%”, substitute “25%”.

50  Subsection 23(2)

Omit “26%”, substitute “25%”.

51  Paragraph 23(3)(b)

Omit “26%”, substitute “25%”.

52  Paragraph 23(4)(c)

Omit “26%”, substitute “25%”.

53  Paragraph 23(6)(b)

Omit “$788”, substitute “$762”.

54  Subsection 23(7)

Omit “39%”, substitute “37.5%”.

55  Paragraph 23A(a)

Omit “26%”, substitute “25%”.

56  Section 25

Omit “26%”, substitute “25%”.

Part 12Application of amendments

57  Application of amendments

(1)       Subject to the following subitems, the amendments made by Part 1 of this Schedule apply to the 2016‑17 year of income and later years of income.

(2)       Subject to the following subitems, the amendments made by Part 2 of this Schedule apply to the 2017‑18 year of income and later years of income.

(3)       Subject to the following subitems, the amendments made by Part 3 of this Schedule apply to the 2018‑19 year of income and later years of income.

(4)       Subject to the following subitems, the amendments made by Part 4 of this Schedule apply to the 2019‑20 year of income and later years of income.

(5)       Subject to the following subitems, the amendments made by Part 5 of this Schedule apply to the 2020‑21 year of income and later years of income.

(6)       Subject to the following subitems, the amendments made by Part 6 of this Schedule apply to the 2021‑22 year of income and later years of income.

(7)       Subject to the following subitems, the amendments made by Part 7 of this Schedule apply to the 2022‑23 year of income and later years of income.

(8)       Subject to the following subitems, the amendments made by Part 8 of this Schedule apply to the 2023‑24 year of income and later years of income.

(9)       Subject to the following subitems, the amendments made by Part 9 of this Schedule apply to the 2024‑25 year of income and later years of income.

(10)     Subject to the following subitem, the amendments made by Part 10 of this Schedule apply to the 2025‑26 year of income and later years of income.

(11)     The amendments made by Part 11 of this Schedule apply to the 2026‑27 year of income and later years of income.

Schedule 2Amount of tax discount for unincorporated small businesses

Part 1Amendments commencing 1 July 2016

Income Tax Assessment Act 1997

1  Subsection 328‑360(1)

Omit “5%”, substitute “8%”.

Part 2Amendments commencing 1 July 2024

Income Tax Assessment Act 1997

2  Subsection 328‑360(1)

Omit “8%”, substitute “10%”.

Part 3Amendments commencing 1 July 2025

Income Tax Assessment Act 1997

3  Subsection 328‑360(1)

Omit “10%”, substitute “13%”.

Part 4Amendments commencing 1 July 2026

Income Tax Assessment Act 1997

4  Subsection 328‑360(1)

Omit “13%”, substitute “16%”.

Part 5Application of amendments

5  Application of amendments

(1)       Subject to the following subitems, the amendments made by Part 1 of this Schedule apply to the 2016‑17 income year and later income years.

(2)       Subject to the following subitems, the amendments made by Part 2 of this Schedule apply to the 2024‑25 income year and later income years.

(3)       Subject to the following subitem, the amendments made by Part 3 of this Schedule apply to the 2025‑26 income year and later income years.

(4)       The amendments made by Part 4 of this Schedule apply to the 2026‑27 income year and later income years.

Schedule 3Access to small business concessions, etc.

Part 1Amendments

Income Tax Assessment Act 1997

1  Section 152‑5

Omit:

       (a)     the entity must be a small business entity or a partner in a partnership that is a small business entity, or the net value of assets that the entity and related entities own must not exceed $6,000,000;

substitute:

       (a)     the entity must be a CGT small business entity or a partner in a partnership that is a CGT small business entity, or the net value of assets that the entity and related entities own must not exceed $6,000,000;

2  Subparagraph 152‑10(1)(c)(i)

Omit “*small business entity”, substitute “*CGT small business entity”.

3  Subparagraph 152‑10(1)(c)(iii)

Omit “small business entity”, substitute “CGT small business entity”.

4  Paragraph 152‑10(1)(c) (note)

Repeal the note.

5  After subsection 152‑10(1)

Insert:

CGT small business entity

       (1AA)  You are a CGT small business entity for an income year if:

                     (a)  you are a *small business entity for the income year; and

                     (b)  you would be a small business entity for the income year if each reference in section 328‑110 to $10 million were a reference to $2 million.

Note:          For the purposes of subsection (1A) or (1B), in determining whether an entity would be a small business entity, see also sections 152‑48 and 152‑78.

6  Paragraph 152‑10(1A)(a)

Omit “*small business entity”, substitute “*CGT small business entity”.

7  Paragraph 152‑10(1A)(d)

Omit “small business entity”, substitute “CGT small business entity”.

8  Subsection 152‑10(1A) (note 2)

Repeal the note.

9  Paragraph 152‑10(1B)(b)

Omit “*small business entity”, substitute “*CGT small business entity”.

10  Subsection 152‑10(1B) (note 1)

Repeal the note.

11  Subsection 152‑10(1B) (note 2)

Omit “Note 2”, substitute “Note”.

12  Subsection 152‑48(1)

Omit “*small business entity”, substitute “*CGT small business entity”.

13  Section 152‑100

Omit “small business entity”, substitute “CGT small business entity”.

14  At the end of subsection 328‑10(1)

Add:

Note 1:       The CGT concessions mentioned in items 1, 2, 3 and 4 of the table apply only if you are a CGT small business entity (see section 152‑10).

Note 2:       The small business income tax offset mentioned in item 6A of the table applies only if you are a small business entity as defined for the purposes of Subdivision 328‑F (see section 328‑357).

15  Paragraph 328‑110(1)(b)

Omit “$2 million” (wherever occurring), substitute “$10 million”.

16  Subsection 328‑110(3) (heading)

Repeal the heading, substitute:

Exception: aggregated turnover for 2 previous income years was $10 million or more

17  Paragraph 328‑110(3)(b)

Omit “$2 million”, substitute “$10 million”.

18  Paragraph 328‑110(4)(b)

Omit “$2 million”, substitute “$10 million”.

19  Section 328‑350

Repeal the section, substitute:

328‑350  What this Subdivision is about

You may be entitled to a tax offset if you are an individual:

       (a)     who is a small business entity; or

      (b)     whose assessable income includes a share of the net small business income of an unincorporated small business entity; or

       (c)     whose assessable income includes an amount because you are a partner in a partnership, or a beneficiary in a trust, that is a small business entity.

In working out whether you are or another entity is a small business entity, a special $5 million turnover threshold applies (see section 328‑357).

20  After section 328‑355

Insert:

328‑357  Special meaning of small business entity for the purposes of this Subdivision—$5 million turnover threshold

                   For the purposes of this Subdivision, in working out whether you are a *small business entity for an income year, assume that each reference in section 328‑110 to $10 million were a reference to $5 million.

21  Subsection 995‑1(1)

Insert:

CGT small business entity has the meaning given by subsection 152‑10(1AA).

Part 2Application of amendments

22  Application of amendments

(1)       Subject to the following subitems, the amendments made by Part 1 of this Schedule apply to the 2016‑17 income year and later income years.

(2)       The following apply to CGT events happening on or after the start of the 2016‑17 income year:

                     (a)  the amendments made by items 1 to 13 of this Schedule;

                     (b)  any other amendments made by this Schedule, to the extent that they relate to the amendments mentioned in paragraph (a).

(3)       The amendments made by items 15 to 18 of this Schedule, to the extent that they relate to the operation of the Fringe Benefits Tax Assessment Act 1986, apply to the FBT year starting on 1 April 2017 and to later FBT years.

Schedule 4Main consequential amendments relating to imputation

Part 1Amendments commencing 1 July 2016

Income Tax Assessment Act 1997

1  Subsection 36‑55(2) (method statement, step 2)

Omit “the *standard corporate tax rate”, substitute “the entity’s *corporate tax rate for imputation purposes for that year”.

2  Subsection 197‑45(2) (formula)

Repeal the formula, substitute:

3  Subsection 197‑45(2)

Insert:

applicable gross‑up rate means the company’s *corporate tax gross‑up rate for the income year in which the franking debit arises.

4  Subsection 197‑60(3) (paragraph (a) of the definition of applicable tax rate)

Omit “the *standard corporate tax rate”, substitute “the company’s *corporate tax rate for imputation purposes for the income year in which the choice is made”.

5  Subsection 197‑60(4) (formula)

Repeal the formula, substitute:

6  At the end of subsection 197‑60(4)

Add:

where:

applicable gross‑up rate means the company’s *corporate tax gross‑up rate for the income year in which the choice is made.

7  Subsection 197‑65(3) (formula)

Repeal the formula, substitute:

8  Subsection 197‑65(3)

Insert:

applicable gross‑up rate means the company’s *corporate tax gross‑up rate for the income year in which the franking debit arises.

9  Subsection 200‑25(1)

Omit “the standard corporate tax rate”, substitute “the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made”.

10  Section 202‑55

Omit “the current standard corporate tax rate”, substitute “the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made”.

11  Subsection 202‑60(2) (formula)

Repeal the formula, substitute:

12  At the end of subsection 202‑60(2)

Add:

where:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

13  Subsection 203‑50(2) (formula)

Repeal the formula, substitute:

14  Subsection 203‑50(2)

Insert:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

15  Subsection 215‑20(2) (formula)

Repeal the formula, substitute:

16  At the end of subsection 215‑20(2)

Add:

where:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

17  Subsection 705‑90(3) (formula)

Repeal the formula, substitute:

18  At the end of subsection 705‑90(3)

Add:

where:

applicable gross‑up rate means the joining entity’s *corporate tax gross‑up rate for the income year that ends, or, if section 701‑30 applies, for the income year that is taken by subsection (3) of that section to end, at the joining time.

19  Paragraph 707‑310(3A)(c) (formula)

Repeal the formula, substitute:

20  Section 976‑1 (formula)

Repeal the formula, substitute:

21  At the end of section 976‑1

Add:

where:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

22  Section 976‑10 (formula)

Repeal the formula, substitute:

23  At the end of section 976‑10

Add:

where:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

24  Section 976‑15 (formula)

Repeal the formula, substitute:

25  At the end of section 976‑15

Add:

where:

applicable gross‑up rate means the *corporate tax gross‑up rate of the entity making the distribution for the income year in which the distribution is made.

26  Subsection 995‑1(1) (definition of corporate tax gross‑up rate)

Repeal the definition, substitute:

corporate tax gross‑up rate, of an entity for an income year, means the amount worked out using the following formula:

27  Subsection 995‑1(1) (definition of corporate tax rate)

Repeal the definition, substitute:

corporate tax rate:

                     (a)  in relation to a company to which paragraph 23(2)(a) of the Income Tax Rates Act 1986 applies—means the rate of tax in respect of the taxable income of a company covered by that paragraph; or

                     (b)  in relation to another entity—means the rate of tax in respect of the taxable income of a company covered by paragraph 23(2)(b) of that Act.

28  Subsection 995‑1(1)

Insert:

corporate tax rate for imputation purposes, of an entity for an income year, means:

                     (a)  unless paragraph (b) applies—the entity’s *corporate tax rate for the income year, worked out on the assumption that the entity’s *aggregated turnover for the income year is equal to its aggregated turnover for the previous income year; or

                     (b)  if the entity did not exist in the previous income year—the rate of tax in respect of the taxable income of a company covered by paragraph 23(2)(a) of the Income Tax Rates Act 1986.

29  Subsection 995‑1(1) (definition of standard corporate tax rate)

Repeal the definition.

Part 2Amendments commencing 1 July 2023

Income Tax Assessment Act 1997

30  Subsection 36‑55(2) (method statement, step 2)

Omit “the entity’s *corporate tax rate for imputation purposes for that year”, substitute “the *corporate tax rate”.

31  Subsection 197‑45(2) (formula)

Repeal the formula, substitute:

32  Subsection 197‑45(2) (definition of applicable gross‑up rate)

Repeal the definition.

33  Subsection 197‑60(3) (paragraph (a) of the definition of applicable tax rate)

Omit “*the company’s *corporate tax rate for imputation purposes for the income year in which the choice is made”, substitute “the *corporate tax rate”.

34  Subsection 197‑60(4) (formula)

Repeal the formula, substitute:

35  Subsection 197‑60(4)

Omit all the words after the formula.

36  Subsection 197‑65(3) (formula)

Repeal the formula, substitute:

37  Subsection 197‑65(3) (definition of applicable gross‑up rate)

Repeal the definition.

38  Subsection 200‑25(1)

Omit “the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made”, substitute “the corporate tax rate”.

39  Section 202‑55

Omit “the entity’s corporate tax rate for imputation purposes for the income year in which the distribution is made”, substitute “the corporate tax rate”.

40  Subsection 202‑60(2) (formula)

Repeal the formula, substitute:

41  Subsection 202‑60(2)

Omit all the words after the formula.

42  Subsection 203‑50(2) (formula)

Repeal the formula, substitute:

43  Subsection 203‑50(2) (definition of applicable gross‑up rate)

Repeal the definition.

44  Subsection 215‑20(2) (formula)

Repeal the formula, substitute:

45  Subsection 215‑20(2)

Omit all the words after the formula.

46  Subsection 705‑90(3) (formula)

Repeal the formula, substitute:

47  Subsection 705‑90(3)

Omit all the words after the formula.

48  Paragraph 707‑310(3A)(c) (formula)

Repeal the formula, substitute:

49  Section 976‑1 (formula)

Repeal the formula, substitute:

50  Section 976‑1

Omit all the words after the formula.

51  Section 976‑10 (formula)

Repeal the formula, substitute:

52  Section 976‑10

Omit all the words after the formula.

53  Section 976‑15 (formula)

Repeal the formula, substitute:

54  Section 976‑15

Omit all the words after the formula.

55  Subsection 995‑1(1) (definition of corporate tax gross‑up rate)

Repeal the definition, substitute:

corporate tax gross‑up rate means the amount worked out using the following formula:

56  Subsection 995‑1(1) (definition of corporate tax rate)

Repeal the definition, substitute:

corporate tax rate means the rate of tax in respect of the taxable income of a company under subsection 23(2) of the Income Tax Rates Act 1986.

57  Subsection 995‑1(1) (definition of corporate tax rate for imputation purposes)

Repeal the definition.

Part 3Application of amendments

58  Application of amendments

(1)       Subject to the following subitem, the amendments made by Part 1 of this Schedule apply to the 2016‑17 income year and later income years.

(2)       The amendments made by Part 2 of this Schedule apply to the 2023‑24 income year and later income years.

Schedule 5Other consequential amendments

Part 1Amendments commencing 1 July 2016

Income Tax Assessment Act 1997

1  Paragraph 65‑30(2)(a)

Omit “0.285”, substitute “0.275”.

2  Paragraph 65‑35(3A)(a)

Omit “28.5”, substitute “27.5”.

Part 2Amendments commencing 1 July 2017

Income Tax Assessment Act 1997

3  Subsection 36‑17(5) (example)

Omit “For the 2015‑16 income year, Company A (which is not a small business entity)”, substitute “For the 2017‑18 income year, Company A (which is not a base rate entity)”.

4  Subsection 36‑55(1) (example)

Omit “For the 2015‑16 income year, Company E (which is not a small business entity)”, substitute “For the 2017‑18 income year, Company E (which is not a base rate entity)”.

5  Subsection 36‑55(2) (example)

Omit “2002‑2003”, substitute “2017‑2018”.

6  Paragraph 65‑30(2)(a)

Omit “*small business entity”, substitute “base rate entity (within the meaning of the Income Tax Rates Act 1986)”.

7  Paragraph 65‑35(3A)(a)

Omit “*small business entity”, substitute “base rate entity (within the meaning of the Income Tax Rates Act 1986)”.

8  Subsection 115‑280(3) (example)

Omit “A listed investment company (which is not a small business entity)”, substitute “A listed investment company (which is not a base rate entity)”.

Part 3Amendments commencing 1 July 2023

Income Tax Assessment Act 1936

9  Subsection 160AAB(1) (definition of statutory percentage)

Repeal the definition, substitute:

statutory percentage means:

                     (a)  if the year of income is the 2002‑03 year of income or a later year of income before the 2024‑25 year of income—30%; or

                     (b)  if the year of income is the 2024‑25 year of income—27.5%; or

                     (c)  if the year of income is the 2025‑26 year of income—27%; or

                     (d)  if the year of income is the 2026‑27 year of income—26%; or

                     (e)  if the year of income is the 2027‑28 year of income or a later year of income—25%.

Income Tax Assessment Act 1997

10  Subsection 36‑17(5) (example)

Repeal the example, substitute:

Example:    For the 2023‑24 income year, Company A has:

·      a tax loss of $150 from a previous income year; and

·      assessable income of $200 (franked distribution of $72.50, franking credit of $27.50 and $100 of income from other sources); and

·      no deductions; and

·      no net exempt income.

                   The tax offset of $27.50 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Company A would not have an amount of excess franking offsets for that year if the tax loss were disregarded (see section 36‑55). This is because the tax offset of $27.50 is less than $55, the amount of income tax that Company A would have to pay if it did not have the tax offset and the tax loss. Paragraph (a) therefore does not apply.

                   If Company A chooses to deduct the full amount of the tax loss, it would have an amount of excess franking offsets of $13.75:

                  

                   Company A therefore cannot make this choice because of paragraph (b).

                   However, if Company A chooses to deduct $100 of the tax loss, it would not have an amount of excess franking offsets:

                  

                   Company A therefore can choose to deduct $100 of the tax loss.

11  Subsection 36‑55(1) (example)

Repeal the example, substitute:

Example:    For the 2023‑24 income year, Company E has:

·      assessable income of $200 (franked distribution of $145 and franking credit of $55); and

·      $100 of deductions that are allowable.

                   The tax offset of $55 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Disregarding the tax offset of $55 from the franking credit, the amount of income tax that Company E would have to pay is $27.50:

                  

                   This amount is $27.50 less than the tax offset of $55. Company E therefore has an amount of excess franking offsets of $27.50 for that year.

12  Subsection 36‑55(2) (example)

Omit “2017‑2018”, substitute “2023‑2024”.

13  Subsection 36‑55(2) (example)

Omit “$30”, substitute “$27.50”.

14  Subsection 65‑30(2)

Repeal the subsection, substitute:

             (2)  However, reduce the *tax offset by the amount worked out by multiplying your *net exempt income by 0.275, if you have a taxable income for the income year.

15  Subsection 65‑35(3A)

Repeal the subsection, substitute:

          (3A)  In reducing *net exempt income for an income year under subsection (3), each 27.5 cents of *tax offset reduces the net exempt income by $1.

16  Subsection 115‑280(3) (example)

Repeal the example, substitute:

Example:    A listed investment company disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.

                   The net capital gain is subject to tax at 27.5%. The after tax gain is therefore $7,250.

                   The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:

                  

                   Daryl, being an individual, can deduct 50% of $10, which is $5.

Part 4Amendments commencing 1 July 2024

Income Tax Assessment Act 1997

17  Subsection 36‑17(5) (example)

Repeal the example, substitute:

Example:    For the 2024‑25 income year, Company A has:

·      a tax loss of $150 from a previous income year; and

·      assessable income of $200 (franked distribution of $73, franking credit of $27 and $100 of income from other sources); and

·      no deductions; and

·      no net exempt income.

                   The tax offset of $27 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Company A would not have an amount of excess franking offsets for that year if the tax loss were disregarded (see section 36‑55). This is because the tax offset of $27 is less than $54, the amount of income tax that Company A would have to pay if it did not have the tax offset and the tax loss. Paragraph (a) therefore does not apply.

                   If Company A chooses to deduct the full amount of the tax loss, it would have an amount of excess franking offsets of $13.50:

                  

                   Company A therefore cannot make this choice because of paragraph (b).

                   However, if Company A chooses to deduct $100 of the tax loss, it would not have an amount of excess franking offsets:

                  

                   Company A therefore can choose to deduct $100 of the tax loss.

18  Subsection 36‑55(1) (example)

Repeal the example, substitute:

Example:    For the 2024‑25 income year, Company E has:

·      assessable income of $200 (franked distribution of $146 and franking credit of $54); and

·      $100 of deductions that are allowable.

                   The tax offset of $54 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Disregarding the tax offset of $54 from the franking credit, the amount of income tax that Company E would have to pay is $27:

                  

                   This amount is $27 less than the tax offset of $54. Company E therefore has an amount of excess franking offsets of $27 for that year.

19  Subsection 36‑55(2) (example)

Omit “2023‑2024”, substitute “2024‑2025”.

20  Subsection 36‑55(2) (example)

Omit “$27.50”, substitute “$27”.

21  Subsection 65‑30(2)

Omit “0.275”, substitute “0.27”.

22  Subsection 65‑35(3A)

Omit “27.5”, substitute “27”.

23  Subsection 115‑280(3) (example)

Repeal the example, substitute:

Example:    A listed investment company disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.

                   The net capital gain is subject to tax at 27%. The after tax gain is therefore $7,300.

                   The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:

                  

                   Daryl, being an individual, can deduct 50% of $10, which is $5.

Part 5Amendments commencing 1 July 2025

Income Tax Assessment Act 1997

24  Subsection 36‑17(5) (example)

Repeal the example, substitute:

Example:    For the 2025‑26 income year, Company A has:

·      a tax loss of $150 from a previous income year; and

·      assessable income of $200 (franked distribution of $74, franking credit of $26 and $100 of income from other sources); and

·      no deductions; and

·      no net exempt income.

                   The tax offset of $26 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Company A would not have an amount of excess franking offsets for that year if the tax loss were disregarded (see section 36‑55). This is because the tax offset of $26 is less than $52, the amount of income tax that Company A would have to pay if it did not have the tax offset and the tax loss. Paragraph (a) therefore does not apply.

                   If Company A chooses to deduct the full amount of the tax loss, it would have an amount of excess franking offsets of $13:

                  

                   Company A therefore cannot make this choice because of paragraph (b).

                   However, if Company A chooses to deduct $100 of the tax loss, it would not have an amount of excess franking offsets:

                  

                   Company A therefore can choose to deduct $100 of the tax loss.

25  Subsection 36‑55(1) (example)

Repeal the example, substitute:

Example:    For the 2025‑26 income year, Company E has:

·      assessable income of $200 (franked distribution of $148 and franking credit of $52); and

·      $100 of deductions that are allowable.

                   The tax offset of $52 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Disregarding the tax offset of $52 from the franking credit, the amount of income tax that Company E would have to pay is $26:

                  

                   This amount is $26 less than the tax offset of $52. Company E therefore has an amount of excess franking offsets of $26 for that year.

26  Subsection 36‑55(2) (example)

Omit “2024‑2025”, substitute “2025‑2026”.

27  Subsection 36‑55(2) (example)

Omit “$27”, substitute “$26”.

28  Subsection 65‑30(2)

Omit “0.27”, substitute “0.26”.

29  Subsection 65‑35(3A)

Omit “27”, substitute “26”.

30  Subsection 115‑280(3) (example)

Repeal the example, substitute:

Example:    A listed investment company disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.

                   The net capital gain is subject to tax at 26%. The after tax gain is therefore $7,400.

                   The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:

                  

                   Daryl, being an individual, can deduct 50% of $10, which is $5.

Part 6Amendments commencing 1 July 2026

Income Tax Assessment Act 1997

31  Subsection 36‑17(5) (example)

Repeal the example, substitute:

Example:    For the 2026‑27 income year, Company A has:

·      a tax loss of $150 from a previous income year; and

·      assessable income of $200 (franked distribution of $75, franking credit of $25 and $100 of income from other sources); and

·      no deductions; and

·      no net exempt income.

                   The tax offset of $25 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Company A would not have an amount of excess franking offsets for that year if the tax loss were disregarded (see section 36‑55). This is because the tax offset of $25 is less than $50, the amount of income tax that Company A would have to pay if it did not have the tax offset and the tax loss. Paragraph (a) therefore does not apply.

                   If Company A chooses to deduct the full amount of the tax loss, it would have an amount of excess franking offsets of $12.50:

                  

                   Company A therefore cannot make this choice because of paragraph (b).

                   However, if Company A chooses to deduct $100 of the tax loss, it would not have an amount of excess franking offsets:

                  

                   Company A therefore can choose to deduct $100 of the tax loss.

32  Subsection 36‑55(1) (example)

Repeal the example, substitute:

Example:    For the 2026‑27 income year, Company E has:

·      assessable income of $200 (franked distribution of $150 and franking credit of $50); and

·      $100 of deductions that are allowable.

                   The tax offset of $50 from the franking credit is not stated in Division 67 to be subject to the refundable tax offset rules.

                   Disregarding the tax offset of $50 from the franking credit, the amount of income tax that Company E would have to pay is $25:

                  

                   This amount is $25 less than the tax offset of $50. Company E therefore has an amount of excess franking offsets of $25 for that year.

33  Subsection 36‑55(2) (example)

Omit “2025‑2026”, substitute “2026‑2027”.

34  Subsection 36‑55(2) (example)

Omit “$26”, substitute “$25”.

35  Subsection 65‑30(2)

Omit “0.26”, substitute “0.25”.

36  Subsection 65‑35(3A)

Omit “26”, substitute “25”.

37  Subsection 115‑280(3) (example)

Repeal the example, substitute:

Example:    A listed investment company disposes of a CGT asset for $30,000. The asset had a cost base of $10,000. The capital gain is therefore $20,000. The company applies a capital loss of $10,000 against the gain. Its net capital gain is $10,000.

                   The net capital gain is subject to tax at 25%. The after tax gain is therefore $7,500.

                   The company pays a fully franked dividend to Daryl, one of its shareholders. It advises Daryl that his share of the attributable part of the dividend is:

                  

                   Daryl, being an individual, can deduct 50% of $10, which is $5.