Eligibility for the Lower Company Tax Rate Exposure Draft Legislation .._.pdf (314 kb)
Greenwoods & Herbert Smith Freehills has provided a submission on the exposure draft legislation released on 18 September 2017 which is aimed at ensuring that a corporate tax entity will not qualify for the lower corporate tax rate if 80 percent or more of its assessable income is income of a passive nature.
Our submission raises a number of concerns with the draft legislation including that the proposed drafting would result in some genuine active business income being incorrectly classified as passive. Further, we seek clarification on when a company ‘carries on a business’ in an income year for the purposes of determining whether an entity is eligible for the 27.5 percent corporate tax rate.
Finally, we argue that the proposals should not apply retrospectively from the 2016-17 income year due to the delay by Government in announcing the changes and its impact on taxpayers who may have already lodged their income tax returns, and determined and paid dividends based on current franking rules.