On 16 October 2018, the Treasury Laws Amendment (Lower Taxes for Small and Medium Businesses) Bill 2018 received royal assent. This Bill implements the proposal to accelerate the reduction of the corporate tax rate for base rate entities. A base rate entity is a corporate tax entity with an aggregated turnover of less than $50 million and no more than 80% of its income derived is of a passive nature.

Under this Bill, the corporate tax rate for base rate entities will reduce from 27.5% to 26% in the 2020-21 year before being cut to 25% for the 2021-22 income year and subsequent income years (rather than the current 2026-27 year as currently legislated).

Additionally, the Bill proposes to increase the small business income tax offset rate to 13% of an eligible individual’s basic income tax liability relating to their total net small business income for the 2020-21 income year. This rate will then increase to 16% for the 2021-22 income year and subsequent income years.