Business Tax Calculator Australia

For the 2025-2026 financial year, Australia has two company tax rates:

• 25% for base rate entities (companies with aggregated turnover less than $50 million and passive income less than 80% of total assessable income)
• 30% for all other companies (those with turnover of $50 million or more, or with high levels of passive income)

Base rate entities include most small and medium-sized operating businesses. Passive income includes interest, dividends, rent, royalties, and net capital gains, which are considered when determining eligibility for the lower company tax rate.

There's no single "most tax-efficient" business structure in Australia as the optimal structure depends on your specific circumstances. Here's a brief comparison:

• Companies benefit from a flat tax rate (25% for small businesses), which can be advantageous for higher income levels, and offer asset protection. However, getting money out of the company may trigger additional tax.
• Sole traders are simple and have low compliance costs, but higher incomes are taxed at progressive individual rates up to 45%.
• Partnerships offer shared responsibilities but partners are jointly liable and taxed at individual rates.
• Trusts offer flexibility in distributing income to beneficiaries who may be on lower tax rates, but have higher setup and ongoing compliance costs.

The most tax-efficient structure depends on factors like your expected profit level, whether you need to reinvest profits in the business, asset protection needs, and your future exit strategy. It's recommended to consult with a tax professional before making this decision.

Small businesses in Australia (generally those with an aggregated turnover of less than $10 million) can access various tax concessions:

• Instant asset write-off: Immediately deduct the business portion of the cost of an asset in the year it's first used or installed ready for use
• Simplified depreciation rules: Including the option to pool assets and claim one deduction for all assets in the pool
• Small business income tax offset: For unincorporated small businesses, providing a tax offset of up to $1,000
• CGT concessions: Four possible concessions that can reduce or eliminate CGT on business assets
• GST and BAS concessions: Options for annual GST reporting and simplified BAS
• PAYG installment concessions: Options to calculate based on GDP-adjusted notional tax
• Fringe benefits tax (FBT) concessions: Including car parking exemptions and work-related device exemptions
• Immediate deduction for certain start-up costs: Professional, legal, and accounting advice

Eligibility criteria and specific rules apply to each concession. Our calculator accounts for these concessions when determining your business tax liability.

For sole traders and partnerships, business income is taxed as follows:

• Sole traders: Business income is added to any other personal income and taxed at your individual income tax rates. You'll pay progressive tax rates ranging from 0% to 45%, plus the Medicare levy of 2%.
• Partnerships: A partnership itself doesn't pay income tax. Instead, each partner reports their share of the partnership's net income in their individual tax return, regardless of whether the income is actually distributed to them. Each partner pays tax on their portion at their individual tax rates.

Both structures allow business losses to offset other income (subject to non-commercial loss rules), and both may qualify for small business tax concessions if they meet eligibility criteria. Unlike companies, there's no separation between business and personal income, which means all business profits are taxed in the year they're earned, even if the money remains in the business.

When an Australian company pays dividends, it has several tax obligations to consider:

• Franking dividends: Companies can pass on the tax they've paid to shareholders by franking dividends. The franking credit represents the company tax already paid.
• Franking account maintenance: Companies must maintain a franking account to track tax paid and franking credits distributed.
• Dividend statements: When paying dividends, companies must provide shareholders with dividend statements showing the dividend amount, franking percentage, and franking credits.
• Annual reporting: Companies must report all dividends paid and franking credits distributed in their annual company tax return.
• Benchmark franking rule: Within a franking period, all dividends must be franked to the same percentage (the benchmark franking percentage).

Shareholders receiving dividends must declare both the dividend amount and any franking credits in their tax returns. The franking credits offset their tax liability, potentially resulting in a tax refund if their marginal tax rate is lower than the company tax rate.