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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
TREASURY LAWS AMENDMENT (ENTERPRISE TAX PLAN) BILL 2016
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be moved on behalf of the Government
(Circulated by authority of the
Treasurer, the Hon Scott Morrison MP)
Table of contents
General outline and financial impact....................................................... 5
Amendments to Treasury Laws Amendment (Enterprise Tax
Plan) Bill 2016 .............................................................. 7
General outline and financial impact
Amendments to Treasury Laws Amendment (Enterprise Tax
Plan) Bill 2016
The amendments to the Treasury Laws Amendment (Enterprise Tax Plan)
Bill 2017 will ensure that the corporate tax rate for corporate tax entities
that are small business entities will be reduced to 27.5 per cent for the
2016-17 income year.
This 27.5 per cent rate will be extended to corporate tax entities that are
base rate entities from the 2017-18 income year. A base rate entity will be
an entity that carries on a business and:
• for the 2017-18 income year -- has an aggregated turnover
of less than $25 million; and
• for the 2018-19 income year and later income years -- has an
aggregated turnover of less than $50 million.
The 27.5 per cent rate for base rate entities will subsequently be cut to:
• 27 per cent for the 2024-25 income year;
• 26 per cent for the 2025-26 income year; and
• 25 per cent for the 2026-27 and later income years.
Date of effect: The corporate tax rate will start to be reduced from the
2016-17 income year for small business entities.
Proposal announced: Not previously announced.
Financial impact: These amendments are estimated to have the following
revenue implications:
2016-17 2017-18 2018-19 2019-20
0 0 0 $100m
The Bill, as amended, will implement the first stage of the Enterprise Tax
Plan corporate tax cuts.
Amendments to Treasury Laws
Amendment (Enterprise Tax Plan) Bill
2016
Outline of chapter
1.1 The amendments to the Treasury Laws Amendment (Enterprise
Tax Plan) Bill 2017 will ensure that the corporate tax rate for corporate
tax entities that are small business entities will be reduced to 27.5 per cent
for the 2016-17 income year.
1.2 This 27.5 per cent rate will be extended to corporate tax entities
that are base rate entities from the 2017-18 income year. A base rate entity
will be an entity that carries on a business and:
• for the 2017-18 income year -- has an aggregated turnover
of less than $25 million; and
• for the 2018-19 income year and later income years -- has an
aggregated turnover of less than $50 million.
1.3 The 27.5 per cent rate for base rate entities will subsequently be
cut to:
• 27 per cent for the 2024-25 income year;
• 26 per cent for the 2025-26 income year; and
• 25 per cent for the 2026-27 and later income years.
Detail explanation of new law
Amendment 1 -- Modification to the commencement provision
1.4 Amendment 1 will modify the commencement provision in
Clause 2 to this Bill to remove references to those parts of the Bill that
have been removed by these amendments.
7
Amendments 2 and 3 -- Modifications to Schedule 1 (Reducing the
corporate tax rate)
1.5 Schedule 1 to the Bill contains amendments to reduce the
corporate tax rate.
Amendment 2
1.6 Amendment 2 will modify this Schedule to remove the
provisions that:
• increase the base rate entity threshold from $50,000 for the
2018-19 income year to $1 billion for the 2022-23 income
year; and
• extend the lower corporate tax rate to all corporate tax
entities from the 2024-25 income year.
1.7 As a consequence of this amendment, the corporate tax rate for
corporate tax entities that are small business entities will be reduced to
27.5 per cent for the 2016-17 income year.
1.8 This 27.5 per cent rate will be extended to corporate tax entities
that are base rate entities from the 2017-18 income year. A base rate entity
will be an entity that carries on a business and:
• for the 2017-18 income year -- has an aggregated turnover
of less than $25 million; and
• for the 2018-19 income year and later income years -- has an
aggregated turnover of less than $50 million.
1.9 The 27.5 per cent rate for base rate entities will subsequently be
cut to:
• 27 per cent for the 2024-25 income year;
• 26 per cent for the 2025-26 income year; and
• 25 per cent for the 2026-27 and later income years.
1.10 Consequently, the corporate tax rate for corporate tax entities
with an aggregated turnover of $50 million or more will remain at
30 per cent.
8
Amendment 3
1.11 Amendment 3 will modify the application provision for
Schedule 1 to the Bill in item 57 to remove references to Parts 4 to 8 of
the Schedule, which have been removed by these amendments.
Amendments 4 and 5 -- Modifications to Schedule 4 (Main consequential
amendments relating to imputation)
1.12 Schedule 4 to the Bill contains consequential amendments to
relating to the operation of the imputation system.
Amendment 4
1.13 Amendment 4 will remove Part 2 of Schedule 4 to the Bill. The
amendments in this Part are no longer necessary because the differential
corporate tax rate between base rate entities and other corporate tax
entities is to be retained.
Amendment 5
1.14 Amendment 3 will modify the application provision for
Schedule 4 to the Bill in item 58 to remove the reference to Part 2 of the
Schedule, which has been removed by these amendments.
Amendment 6 -- Modifications to Schedule 5 (Other consequential
amendments)
1.15 Schedule 6 to the Bill contains a range of consequential
amendments relating to the reduction in the corporate tax rate for all
corporate tax entities proposed in the Bill.
1.16 Amendment 6 removes Parts 3 to 6 of Schedule 6 as the
consequential amendments in these Parts are redundant as a consequence
of these amendments.
9
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