Australia's company tax system is built around a unique feature: dividend imputation (franking credits). This system prevents double taxation of corporate profits — the tax paid by the company flows through to shareholders as a credit.

Company Tax Rates 2025-26

Australia has a two-tier company tax rate system:

Base rate entity (BRE): 25% — if your company is a small business with 80% or less of its income from passive sources (investments, rent, interest, royalties) and aggregated turnover under $50 million
Standard rate: 30% — all other companies

Check the ATO's "base rate entity" self-assessment tool each year to confirm your eligibility.

Franking Credits Explained

When a company pays tax on its profits, it can attach franking credits to dividends paid to shareholders. These credits represent the tax the company has already paid. Shareholders then:

Include both the dividend and the franking credit in their assessable income
Get a credit (offset) for the franking credit against their tax payable
If franking credits exceed their tax bill, they may get a refund (for individuals, subject to some rules)

Example

A company pays $700 cash dividend with $300 franking credits (franking rate: 30%). The shareholder declares $1,000 income ($700 + $300) and gets a $300 tax offset. If their marginal tax rate is 37%, they pay $370 tax minus $300 credit = $70 net tax on the dividend.

Dividend Types

Fully franked dividend: The company has paid tax at the full corporate rate on the profits
Partially franked dividend: The company has only paid tax on part of the profit (e.g., some income was tax-exempt)
Unfranked dividend: No tax has been paid by the company (e.g., from tax-exempt income or prior-year retained earnings with no franking credits)
Deemed dividend: A loan or benefit to a shareholder that the ATO treats as a dividend

Lodging a Company Tax Return

Company tax returns are due 7 months after the end of the income year (31 March for standard 30 June balancers). Companies also need to lodge quarterly or monthly BAS if registered for GST, and may need to pay PAYG instalments quarterly.

Directors' Obligations

Company directors have personal liability for:

PAYG withholding (unpaid tax withheld from employee wages)
GST (unpaid amounts)
Super Guarantee Charge (unpaid super for employees)

The ATO can issue Director Penalty Notices (DPNs) making directors personally liable for these debts.

Fringe Benefits Tax (FBT)

If your company provides benefits to employees (cars, parking, gym memberships, etc.), FBT may apply. The FBT rate is 47% for 2025-26, and the employer can generally claim a deduction for the cost of the benefit plus the FBT paid.

How Dividend Imputation Eliminates Double Tax

Australia's dividend imputation system is designed so company profits are taxed once, at the shareholder's marginal rate. When a company pays tax on its profit — at 25% if it is a base rate entity (aggregated turnover under $50 million and no more than 80% passive income), or 30% otherwise — it attaches franking credits to the dividends it pays. When you receive a franked dividend, you declare the grossed-up amount as income and claim the franking credit as a tax offset. If your marginal rate is higher than the company rate, you pay the difference; if it is lower, you get a refund.

Worked example: a base rate company earns $1,000 of profit and pays $250 company tax. It distributes the remaining $750 as a fully franked dividend with $250 of franking credits. A shareholder on the 37% marginal rate declares $1,000 of grossed-up income and owes $370 of tax, minus the $250 credit — a net $120. Total tax paid across both levels is $370, exactly what they would have paid earning $1,000 directly.

Company Obligations for the 2025-26 Year

Lodge the company tax return within 7 months of the end of the income year (or later through a tax agent) and pay any balance due by the lodgement deadline — the ATO charges interest on late payments.
Lodge quarterly BAS if registered for GST or PAYG instalments.
Pay super for directors and employees at 12% of ordinary time earnings.
Prepare a distribution statement for any dividends, showing franking credits attached.
Directors have personal liability for unpaid PAYG withholding and super — the director penalty regime can make you personally responsible if you trade while these are unpaid.

FBT Essentials Every Employer Should Know

Fringe benefits — cars, parking, gym memberships, entertainment — are taxed at the employer's end at 47% for the FBT year ending 31 March 2026. Small, irregular benefits under $300 are exempt, and some benefits like super contributions are excluded entirely. Reportable fringe benefits appear on payment summaries and can push employees over the MLS thresholds, so it pays to plan how benefits are structured.