A company is a Base Rate Entity (BRE) for an income year if:
- the company’s aggregated turnover for that income year is less than the aggregated turnover threshold for that income year, and
- it has 80% or less of their assessable income in that income year that is base rate entity passive income.
For the 2025 financial year the aggregated annual turnover threshold is $50 million.
Base rate entity passive income is:
- corporate distributions and franking credits on these distributions
- royalties and rent
- interest income (some exceptions apply)
- gains on qualifying securities
- a net capital gain
- an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.
If a company qualifies as a BRE for the 2025 financial year its tax rate will be 25% as compared to 30% for a company that doesn’t qualify as a BRE.
An example when a company has qualified as a BRE for many years and then its circumstances change and no longer qualifies is detailed below.
Company A own units in Unit Trust B which operates a business, each year Unit Trust B distributes income to Company A of which all is business income then Company A will qualify as BRE (and a 25% tax rate) assuming this is all its assessable income.
In July 2025 Company A sells its units in Unit Trust B resulting in a net capital gain of $500,000, no further distributions were received. Assuming Company A has no other income for the 2025 financial year Company A will NOT qualify as a BRE and will therefore have a tax rate of 30%.
Planning for these one off capital gains can be an important measure to ensure your aware of what corporate tax rate you will be paying.
