From the 2021–22 income year onwards, a company that qualifies as a base rate entity must apply the 25% company tax rate; companies that don't qualify pay the full 30% rate (ATO, Changes to company tax rates, last updated 4 September 2026, checked 30 September 2026). To get the 25% rate, a company must pass two tests measured on the current income year: aggregated turnover below $50 million (the threshold since 2018–19) and 80% or less of assessable income being base rate entity passive income.
What is a base rate entity?
A base rate entity is a company entitled to the lower company tax rate. The ATO sets that rate at 25% for base rate entities from 2021–22, with all other companies on 30%. Qualification is decided fresh each income year on two conditions, and prior years' results don't carry over.
How does the aggregated turnover test work?
The first test looks at the company's aggregated turnover for that income year. It must be less than the aggregated turnover threshold, which has been $50 million since 2018–19. Earlier years' turnover does not affect the current-year result.
What is the 80% passive income test?
The second test caps passive income. A company qualifies only if 80% or less of its assessable income for that income year is base rate entity passive income. Like the turnover test, this is judged on the current year alone.
What counts as base rate entity passive income?
Base rate entity passive income is a defined list. It includes:
- corporate distributions and the franking credits attached to those distributions
- royalties and rent
- interest income (some exceptions apply)
- qualifying securities gains
- net capital gains
Where does the ATO publish the current 25% rate?
The ATO's company tax rates table page lists rates only to 2025–26. The 25% rate and the $50 million threshold for 2021–22 and later years are set out on the ATO's Changes to company tax rates page (last updated 4 September 2026). Directors should rely on that page for the current-year rate rather than the rate table.
FAQ
What two tests decide the 25% base rate entity rate?
A company must have aggregated turnover below the $50 million threshold (in place since 2018–19) and 80% or less of its assessable income as base rate entity passive income, both tested on the current income year.
Does a prior year's turnover affect the current rate?
No. The aggregated turnover test and the 80% passive income test are both judged on the current income year; prior years' results don't carry over.
What counts as base rate entity passive income?
The list is: corporate distributions and their franking credits, royalties and rent, interest income (with some exceptions), qualifying securities gains, and net capital gains.
Where does the ATO publish the current 25% rate?
On the ATO Changes to company tax rates page (last updated 4 September 2026). The ATO company tax rates table lists rates only to 2025–26, so the current-year 25% rate is confirmed on the changes page.