I have a client structure as follows:
- Family trust A operating a business with a turnover of less than $10M
- Individual B holds 50% and Company C holds another 50%
- Company C is a bucket company
Scenario
In 2025-26, Trust A distributed taxable trading profits of $100K to the Individual and the remaining $100K to Company C from $200K. Company C's only income is that distribution.
Would Company C be considered a Base Rate Entity and taxed at 25% or would the company pay the 30% tax rate?
If I am not wrong, the Distribution from the operating business of Trust A is Active Income and carries the same nature.
A company will generally be treated as a base rate entity and be subject to the lower corporate tax rate if:
- Its aggregated annual turnover in the relevant income year is less than $50m; AND
- No more than 80% of its assessable income for the year is BREPI.
Here, Company C clears both conditions.
Still, the question is: Would Company C be considered a Base Rate Entity and taxed at 25% or would the company pay the 30% tax rate?
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1,216 views
1 replies