The lower corporate tax rate of 27.5% should apply to a company for the 2017 income year if:
- The company carried on a business in the 2017 year; and
- Its aggregated annual turnover was less than $10m.
The ATO recently issued a draft ruling (TR 2017/D7) that sets out it's view that a company would generally be treated as carrying on a business if it is set up with the purpose and expectation of making profits. The draft ruling provides some examples dealing with corporate beneficiaries and indicates that they should generally be treated as carrying on a business if they receive distributions from a related trust and then use those distributions in commercial income producing activities with the expectation of making a profit. This could include a situation where the company lends the distribution amount back to the trust at commercial rates. Also checkout example 5 of TR 2017/D7.
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