Introduction

What’s new?

These instructions will help you complete the Company tax return 2017 (NAT 0656), the tax return for all companies, including head companies of consolidated and multiple entity consolidated (MEC) groups.

These instructions contain a number of abbreviations for names and technical terms. Each term is spelt out the first time it is used. For more information, see Abbreviations.

Early stage venture capital limited partnership tax offset

From 1 July 2016, a company that is a limited partner of an early stage venture capital limited partnership (ESVCLP) may qualify for:

• a non-refundable carry forward tax offset of up to 10% of their contribution to an ESVCLP. The ESVCLP must have become unconditionally registered on or after 7 December 2015. This includes an ESVCLP that was conditionally registered before this time and then became unconditionally registered on or after 7 December 2015.
• a tax exemption for part of the capital gain or income from the disposal of investments that accrued to the end of the period ending six months after the end of an income year in which the investee’s value has first exceeded $250 million.

This tax offset is shown at item 22 and is included in the calculation of label D in the Calculation statement.

For more information see ESVCLP tax incentives and concessions.

Early stage investor tax incentives

From 1 July 2016, investors who purchase newly issued shares in a qualifying Australian early stage innovation company may be eligible for:

• a tax offset equal to 20% of the amount paid for the shares. This tax offset is capped at a maximum amount of $200,000 for each income year for the investor and their affiliates combined. The offset is not refundable, but can be carried forward to the next income year.
• a modified CGT treatment under which the investor can disregard any capital gains made on the shares that have been continuously held for between one and ten years. Any capital losses on the shares held for less than ten years must be disregarded.

This tax offset is shown at item 23 and is included in the calculation of label D in the Calculation statement.

For more information see Tax incentives for early stage investors.

Small business company tax rate

The small business company tax rate has been reduced from 28.5% to 27.5% for the 2016-17 income year. This lower rate also applies to small businesses that are corporate unit trusts with an income year that started before 1 July 2016 and public trading trusts. Complete the checkbox in the 'Status of Company' section of the return form if you are an eligible small business. For more information about eligibility, see Work out if you're a small business for the income year.

The company tax rate will remain at 30% for all other companies that are not small business entities.

Maximum franking credits

The maximum franking credit that can be allocated to a frankable distribution is based on a company's applicable corporate tax rate, that is, 27.5% for a small business entity, 30% otherwise

Non-profit companies

As the small business company tax rate has been reduced to 27.5%, the shade-in limit for small business non-profit companies has been reduced to $832.

The rates of tax payable by small business non-profit companies are now:

Taxable income	Tax on taxable income
$0 - $416	Nil
$417 - $832	55%
$833 and above	27.5%

Medium credit unions

If you are a medium credit union, the tax payable (before any offsets or credits) is normally limited to 45% of the amount by which your taxable income exceeds $49,999. As the company tax rate has been reduced to 27.5% for small business entities, the 45% rate has been reduced to 41.25% for medium credit unions that are small business companies.

All other companies

The company tax rate remains at 30% for all companies that are not small business entities. The company tax rate also remains unchanged for:

• retirement savings account providers
• authorised deposit-taking institutions
• pooled development funds
• life insurance companies.

Expanding accelerated depreciation for small businesses

New laws have passed allowing small businesses to claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, from 12 May 2015 provided each depreciable asset costs less than $20,000. This will temporarily replace the previous instant asset write-off threshold of $1,000.

This measure started 7.30pm (AEST) 12 May 2015 and will end on 30 June 2017.

The balance of the general small business pool is also immediately deductible if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2017 (including an existing general small business pool).

The 'lock out' laws have also been suspended for the simplified depreciation rules (these prevent small businesses from re-entering the simplified depreciation regime for five years if they have opted out) until the end of 30 June 2017.

In the 2017 budget, the government announced its intention to extend the availability of the $20,000 threshold and ‘lock-out’ laws until 30 June 2018. At the time of publishing, this change had not become law. For more information, see New legislation.

Immediate deductibility for start-up costs

Section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) allows for certain start-up expenses, including costs associated with raising capital, to be immediately deductible where they are incurred by a small business entity or an entity that is not in business. These provisions apply from 2015-2016 onwards.

Foreign resident capital gain withholding

From 1 July 2016, for contracts you entered into with a relevant foreign resident vendor, the foreign resident capital gains withholding regime (FRCGW) imposes an initial 10% withholding obligation on you for the purchase of:

• taxable Australian real property such as land and buildings
• indirect Australian real property interests
• options or rights to acquire Australian real property and Australian real property interests.

For more information, see Capital gains withholding: Impacts on foreign and Australian residents.

FRCGW amount added to your contract price, you are entitled to claim a credit for the amount you paid to the ATO. This tax return instruction guide tells you where to include:

• the capital gain or profit from the asset
• the credit you are claiming.

Corporate unit trusts and public trading trusts

For income years starting on or after 1 July 2016, the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Act 2016External Link:

• repeals the corporate unit trust rules in Division 6B of Part III of the Income Tax Act 1936 (ITAA 1936). This means that trusts formerly subject to Division 6B will no longer be 'corporate unit trusts'. Such trusts may either continue to be taxed similarly to companies if they are a 'public trading trust' under Division 6C (and should lodge a company tax return) or be taxed as a trust (and should lodge a trust tax return).
• introduces transitional rules to allow trusts that cease to be subject to Divisions 6B and 6C of the ITAA 1936 to deal with their franking accounts in respect of certain events that happen on or before 30 June 2018. For example, distributions of profits that arose whilst the trust was a corporate unit trust or public trading trust may be franked where the distribution is made on or before 30 June 2018.

For more information, see Repeal of Division 6B.

Increasing access to company losses

On 1 March 2019, legislation was enacted that will supplement the current ‘same business test’ for company losses with a more flexible 'similar business test'. The new test will expand access to past year losses when companies enter into new transactions or business activities.

The similar business test will allow a company to access losses following a change in ownership where its business, while not the same, is similar having regard to:

• the extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income
• the extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income
• the identity of its current business and the identity of its former business, and
• the extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services or marketing or organisational methods of the former business.

As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.

The 'same business test' and the 'similar business test' are collectively referred to as the 'business continuity test'.

This measure takes effect in relation to income years starting on or after 1 July 2015. For more information, see New legislation.

For further information see LCR 2019/D1 The business continuity test - carrying on a similar business.

Significant Global Entity (SGE)

The significant global entity (SGE) concept is used to give clarity to taxpayers about whether they are within the scope of the measures to which the definition applies.

The concept of SGE was introduced as part of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 legislation which contains a package of measures announced as part of the 2015-16 BudgetThis link opens in a new window. These measures focus on combating multinational tax avoidance.

An entity is a SGE if it is:

• a global parent entity with an annual global income of A$1 billion or more, or
• a member of a group of entities consolidated for accounting purposes and one of the other group members is a global parent entity with an annual global income of A$1 billion or more.

To assist in identifying SGEs, from the 2016-17 income year and going forward, taxpayers will be required to self-assess themselves under the definition of a SGE and notify the tax office on their annual company tax return at 'Status of company' (item 3, G1).

The SGE concept is part of the following measures:

• The Multinational Anti-Avoidance Law (MAAL)
• General Purpose Financial Statement (GPFS)
• Country-by-Country (CbC) reporting
• International Dealings Schedule (IDS)
• Increasing administrative penalties for SGEs
• Reportable tax position (RTP) schedule

For more information see Significant global entities.

The Multinational Anti-Avoidance Law (MAAL)

The Multinational Anti-Avoidance Law (MAAL) is part of the government's efforts to combat tax avoidance by multinational companies operating in Australia. The MAAL has been introduced to ensure that multinationals pay their fair share of tax on the profits earned in Australia. It is aimed at SGEs that enter into artificial arrangements to avoid taxation in Australia (or elsewhere) when supplying goods or services to Australian customers.

For more information see Combating multinational tax avoidance – a targeted anti-avoidance law.

General Purpose Financial Statement (GPFS)

SGEs that are corporate tax entities are required to give the Commissioner a general purpose financial statement (GPFS) if they:

• are Australian residents or foreign residents operating an Australian permanent establishment at the end of the income year, and
• do not lodge a GPFS with the Australian Securities & Investments Commission (ASIC) within the time provided under subsection 319(3) of the Corporations Act 2001.

New item 5 has been added to the tax return to allow taxpayers to indicate if they have lodged or will be lodging a GPFS with ASIC.

Country-by-Country (CbC) reporting

Country-by-Country (CbC) reporting is part of a broader suite of international measures aimed at combating tax avoidance through more comprehensive information being provided to the ATO to better conduct risk assessments associated with transfer pricing.

The measure takes effect from income years commencing on, or after, 1 January 2016. It requires SGEs to supply the ATO with three statements which will provide a clear overview of its global and Australian operations. This information will be shared with tax authorities in the other jurisdictions in which the group operates. The measure also contains revised standards for transfer pricing documentation.

For more information see Country-by-Country reporting.

International Dealings Schedule (IDS)

Entities subject to CbC reporting are generally required to lodge a local file with the tax office as a part of their obligations under the regime. An administrative arrangement is in place with respect to such entities: taxpayers may be exempt from completing labels 2 to 17 of the IDS if they lodge Part A of the local file at the same time as their income tax return.

For more information see International dealings schedule 2017 and Local file / master file 2017.

Increasing administrative penalties for SGEs

On 3 May 2016, the government announced the 'Tax integrity package - increasing administrative penalties for significant global entities' measure. This measure applies to conduct occurring from 1 July 2017.

Administrative penalties for statements will be doubled. This increases the penalties imposed on SGEs that do not take reasonable care, take a tax position that is not reasonably arguable, or fail to provide documents when required and the Commissioner determines the liability without the document.

Failure to lodge on time (FTL) penalties for SGEs will be increased. The base penalty amount will be multiplied by 500 if the entity concerned is an SGE.

Reportable tax position (RTP) schedule

We have made substantial changes to RTP Category C – reportable arrangements. RTP Category C now asks specific questions covering a number of issues that we are focussing on. Taxpayers with income years ending on or after 30 June 2017 must answer the new Category C questions.

For more information see Guide to reportable tax positions 2017.