Corporate tax rate in Australia in 2026

Australia’s standard company tax rate is 30%, but eligible base rate entities may use the lower 25% rate. Working out which rate applies is not simply a question of company size or turnover, as your income mix, business structure, and tax residency can all affect the result. This is especially important when budgeting, forecasting tax costs, or managing an Australian company as part of a wider international business structure. This guide explains when the 30% or 25% rate may apply, how the base rate entity rules work, what foreign-owned businesses should consider, and how to calculate, lodge, and pay company tax in Australia.

It is for general information only and is not tax, legal, or accounting advice. Check current ATO guidance and seek professional advice where your company has cross-border or complex residency issues.

Key takeaways

• Standard rate: The default company tax rate is 30%, and 25% applies only to eligible base rate entities.
• Lower-rate tests: The lower rate depends on aggregated turnover under AUD 50 million and passive income at 80% or less.
• Business structure: Company tax does not apply to every business structure, so sole traders, partnerships, and trusts follow different tax rules.
• Foreign ownership: Foreign ownership does not set the rate by itself, but residency and Australian-sourced income can affect the tax position.
• Before acting: Check current ATO guidance before you budget, lodge, or pay.

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What is the corporate tax rate in Australia?

In plain English, Australian corporate income tax is the tax a company pays on its taxable income. The standard rate is 30%, while an eligible base rate entity may use 25%.

That difference sounds simple, but the lower rate is an eligibility rule, not an automatic reward for being small. The rate applies to taxable income rather than gross revenue, so sales alone do not tell you the final company tax bill.

This table is a high-level summary. Rates, eligibility rules, and tax treatment should be checked against current official guidance before a return or forecast is finalised.

Quick glossary

• ABN: Australian Business Number
• ASIC: Australian Securities and Investments Commission
• ATO: Australian Taxation Office
• Base rate entity: a company that meets the lower-rate tests for the relevant income year

When the 30% company tax rate applies

The 30% company tax rate is the default position for companies that do not meet the base rate entity rules. Turnover on its own does not get a company down to 25%, so check the current company tax and base rate entity guidance before you lodge.

When the 25% base rate entity rate applies

The 25% rate applies only if a company qualifies as a base rate entity for that income year. You therefore need to check more than business size or turnover, because the rules look at both aggregated turnover and the share of assessable income that is passive.

• Aggregated turnover must be under AUD 50 million for the income year.
• 80% or less of assessable income can be base rate entity passive income.
• The test applies each year, so a company can qualify in one year and not in another.

Who qualifies as a base rate entity?

To use the 25% company tax rate correctly, you need to satisfy both core tests rather than relying on the turnover number alone.

Before you budget, forecast, or tell investors which rate applies, check how your business is connected to other entities and what kind of income it earns.

How the aggregated turnover test works

Aggregated turnover can be broader than one company’s standalone sales. It may include the turnover of connected entities and affiliates, which is why foreign-owned groups, family structures, and founders with several related businesses need extra care.

If the wider group is relevant, your 25% company tax position can change even when one Australian company looks small by itself. Check the ATO methodology before relying on an internal forecast.

Confirm:

• current-year turnover
• connected or affiliated entities
• group ownership and control structure
• whether overseas relationships affect the calculation

How passive income affects the 25% rate

Passive income matters because the lower rate depends partly on the share of assessable income treated as base rate entity passive income. This can include interest, rent, royalties, dividends, some capital gains, and certain amounts flowing through trusts or partnerships.

An operating company with trading income may still qualify if its passive income remains within the relevant limit, while a company earning a large share of its income from passive sources may not.

If you assume the lower rate without checking the income mix, you can understate tax in budgets, cash-flow plans, or board papers.

• interest and some other returns on cash
• rent and royalties
• dividends and some capital gains
• trust or partnership amounts traced back to passive income

Taxes

The tax system in Australia: A complete guide for expats

Read more

Does the company tax rate apply to every business structure?

No. Company tax applies to companies and some company-like entities, but it does not automatically apply to sole traders, ordinary partnerships, or trusts. If you have not incorporated, you may be looking at the wrong tax rule entirely.

If you are still choosing a setup, read Expatica’s guide to starting a business in Australia before making an entity decision for tax reasons alone.

Companies vs sole traders, partnerships and trusts

• Companies: taxed at company level on taxable income, using the applicable company tax rate.
• Sole traders: generally taxed as individuals, so business profit usually sits in the personal tax return. See Expatica’s guide to taxes for freelancers and the self-employed in Australia.
• Ordinary partnerships: generally not taxed in the same way as companies, because partners are taxed on their share of net income.
• Trusts: follow separate tax rules, and the result can depend on how income is distributed or retained.

Consider professional advice before changing entity type purely to pursue a lower headline tax rate.

How tax residency affects company tax

Tax residency can change which income falls within the Australian tax system. Foreign ownership alone does not automatically set the company tax rate, but residency and Australian-source questions can change the overall tax position.

Australian resident companies

Australian resident companies are generally taxed on worldwide income. Company residency can depend on incorporation and, in some circumstances, where the business is carried on and where central management and control or relevant voting power sits.

Non-resident companies and permanent establishments

Non-resident companies can have Australian tax obligations on Australian-sourced income, while treaty, permanent establishment, branch, and subsidiary questions may affect the result. If you sell into Australia, operate a branch, or use a local subsidiary, get advice before assuming the outcome.

• Selling to Australian customers from offshore does not answer residency or permanent establishment questions by itself.
• A branch can create different tax and reporting issues from an Australian subsidiary.
• If residency is uncertain, check current ATO business-residency guidance and seek tailored advice.

How to calculate, lodge and pay company tax

Once you know which rate may apply, the next step is working out taxable income and keeping records that support the return. Company tax is calculated on taxable income after relevant deductions and adjustments rather than gross revenue alone.

In practice, this means clean bookkeeping, support for deductions, and a clear filing process. Businesses with overseas suppliers, shareholders, or multi-currency transactions should also keep payment records that allow transactions to be traced back to invoices, contracts, and accounting entries.

Taxable income, deductions and record keeping

Taxable income starts with assessable income and then takes allowable deductions into account. Businesses generally need to lodge an income tax return for a year in which they run the business, even where they do not expect tax to be payable.

Do not assume every business cost is deductible or that incomplete records will be enough later. Keep documentation that supports the figures used in the return.

• sales invoices and payment receipts
• supplier bills, subscriptions, and expense evidence
• payroll, superannuation, and contractor records
• transaction histories, including overseas and multi-currency payments
• contracts and supporting records for unusual transactions

PAYG instalments, returns and deadlines

The filing process broadly moves from the income year and bookkeeping stage to calculating the return, managing any PAYG instalments, and meeting the applicable lodgement deadline.

For broader filing context, Expatica’s guide to filing your income tax in Australia explains the wider Australian tax-return system.

Common mistakes expat founders and foreign-owned SMEs make with company tax

Many mistakes happen before the company tax return is lodged. Founders may assume the 25% rate applies automatically, confuse revenue with taxable income, or overlook how group links and passive income can affect the lower-rate test.

• assuming 25% is a generic small-business company tax rate
• treating gross revenue as taxable income
• ignoring passive income when modelling company tax
• ignoring connected entities when looking at aggregated turnover
• mixing up company tax with sole trader, partnership, or trust tax rules
• relying on old thresholds, rates, or deadlines instead of current ATO guidance

When to get help from a registered tax agent

Professional help may be particularly useful if you have foreign ownership, multiple entities, a branch structure, cross-border royalties, or uncertainty about residency, passive income, or group turnover. You can check whether an adviser is registered through the Tax Practitioners Board Public Register.

Managing cross-border business payments and records

Companies that pay overseas suppliers, contractors, or advisers, or receive funds in more than one currency, also need a clear record of how money moved between currencies and accounts. Payment administration does not determine tax residency or the company tax rate, but good records can make reconciliation and review easier.

Wise Business for international payment admin

Wise Business is one option internationally active businesses can compare for overseas supplier payments, supported currencies, and payment records. It does not determine your company tax rate, residency, deductions, or reporting obligations.

If you are comparing broader business account options, see Expatica’s guide to the best business bank accounts in Australia.

Conclusion

Australia’s company tax rate is not a simple small-business-versus-large-business split. The standard rate is 30%, while 25% may apply only when a company satisfies the base rate entity rules for the relevant income year. Before using either rate in forecasts or filings, check aggregated turnover, passive income, entity structure, and tax residency, and keep records that support the return. Cross-border or group structures can add complexity, so use current ATO guidance and registered professional advice where needed.

Sources

• Australian Taxation Office: company tax rates, checked on 8 July 2026.
• Australian Taxation Office: statutory base rate entity criteria, checked on 8 July 2026.
• business.gov.au: taxable income, deductions, and business income-tax basics, checked on 8 July 2026.
• Tax Practitioners Board: public register for registered tax practitioners, checked on 8 July 2026.