Reduction in company tax rate
1 July 2015
The company tax rate will be reduced by 1.5% to 28.5% from 1 July 2015. For companies earning more than $5,000,000 in taxable income, this reduction will be offset by the 1.5% levy to fund the paid parental leave scheme which also commences from 1 July 2015.
GEM Capital Comment
With the reduction in the company tax rate, investors in companies earning less than $5 million may receive greater dividends but less franking credits, leaving them in the same net after tax position. However, for shareholders of companies with income of more than $5 million, the 1.5% reduction in tax will be offset by the 1.5% levy for the paid parental leave scheme. As a result, shareholders may receive the same level of dividends but less franking credits (assuming the levy is not franked), leaving them worse off.