On 23 August 2018, the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2018 (Bill) was passed by the Senate and now awaits Royal Assent. The Bill ensures that, with effect from the 2017-18 income year, a company will not qualify for the lower 27.5% corporate tax rate if more than 80% of its assessable income is passive income (such as interest, dividends and royalties).
Guidance on what is ‘base rate entity passive income’ (BREPI) has been provided in Draft Law Companion Ruling LCR 2018/D7. BREPI includes corporate distributions, non-share dividends, interest (with some exceptions), royalties, rent, a gain on a qualifying security and a net capital gain. It also provides guidance on how to work out franking credits to be attached to dividends.