Starting a Business
15. Taxation of Companies
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 07 Jul 2015
- One of the main attractions of a company business structure is a comparatively low taxation rate compared to the highest tax rate for individuals. A company pays income tax at a flat rate of 30% on taxable income.
- In addition to this companies are governed by the 'dividend imputation system'.
- Dividends are the amounts paid out using annual company profits.
- They will usually come with an imputation or franking credit attached.
- Individual members who receive assessable dividends from a company are entitled to a rebate for the tax paid by the company on its income.
- In this way the tax is 'imputed' to shareholders.
- Shareholders only pay the difference between the corporate tax rate and their individual marginal rate on the dividend amount.
- One of the tax disadvantages of a company can be that the company does not receive the benefit of the 50% CGT discount.
- This may be less of a concern in companies which are not holding high value appreciating assets.
- For more information see our Company Tax topic.
View more Information on Business & Company