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Company Tax & Instant Asset Write-Off Guide Australia (2026–27)

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Company Tax & Instant Asset Write-Off Guide Australia (2026–27)

Operating a proprietary limited company (Pty Ltd) in Australia provides valuable asset protection, business credibility, and access to corporate tax rates that are significantly lower than top individual personal marginal tax rates (up to 47%).

Whether you are launching a startup, incorporating an existing sole trader enterprise, or planning capital asset acquisitions, this guide outlines the 25% vs 30% company tax tiers, Instant Asset Write-Off concessions, and how corporate profits are distributed via the franking credit system.

1. Australian Company Tax Rates Explained (25% vs 30%)

Unlike individual taxpayers who face progressive tax brackets, Australian companies pay a flat tax rate on all taxable corporate profits (assessable income minus allowable business deductions).

The Two Corporate Tax Rates:

  1. Base Rate Entity Rate (25%): Applies to eligible small-to-medium small businesses.
  2. Standard Company Rate (30%): Applies to larger corporate enterprises and passive investment companies.

How to Qualify for the 25% Base Rate

To qualify for the lower 25% company tax rate in a financial year, a company must satisfy both of the following statutory tests:

  • Aggregated Turnover Test: The company’s aggregated annual turnover (including connected entities and affiliates) is less than $50 million.
  • Base Rate Entity Passive Income (BREPI) Test: No more than 80% of the company’s total assessable income is "passive income" (such as interest, corporate dividends, net capital gains, or residential rental income).

If more than 80% of a company’s revenue comes from passive investment returns rather than active trading operations, it is taxed at the 30% standard rate.

2. Instant Asset Write-Off Concessions (2026–27)

The Instant Asset Write-Off is one of the most popular tax incentives for Australian small businesses, allowing eligible entities to claim an immediate, 100% tax deduction for the business portion of qualifying depreciating assets in the year they are first used or installed ready for use.

Concession FeatureSmall Business Rules (2026–27)
Eligibility ThresholdAggregated annual business turnover under $10 million
Asset Cost ThresholdUp to statutory threshold (e.g. $20,000 per eligible asset)
Eligible AssetsWork utes/vans (under luxury limit), plant machinery, computer servers, tools, office furniture, point-of-sale systems
Ineligible AssetsBuildings/structural improvements, trading stock, assets leased out for more than 50% of the time
Multiple Assets Allowed?Yes — the threshold applies on a per-asset basis (you can buy multiple distinct assets under the cap in a single year)

Practical Example:

A plumbing company purchases a specialized drain inspection camera for $14,500 and a workshop computer for $3,200. Because both individual assets cost under the threshold, the business can immediately deduct the full $17,700 on its company tax return, saving $4,425 in corporate tax (at the 25% rate) in that financial year.

3. How Company Profits Are Taxed: The Franking System

Australia operates an imputation system to prevent double taxation of corporate profits when distributed to shareholders as dividends.

  1. When a company pays 25% tax on its profits, it generates Franking Credits (imputation credits).
  2. When dividends are paid to individual shareholders, the dividend includes these franking credits.
  3. The shareholder declares the grossed-up dividend on their individual tax return, but receives a tax credit equal to the 25% company tax already paid.
  4. If the shareholder's personal marginal tax rate is lower than 25%, the ATO refunds the difference in cash!

4. Calculate Company Tax & Write-Offs

Model corporate tax liabilities, evaluate instant asset deductions, or compare trading structures using our free tools:

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