What Company Rate?

James Murphy Tax


Could you please confirm what company rate is applicable on the following?

Distribution from a Family Trust to a Company. All income is from a trading business within the Trust.

As more than 80% of the income, being distributed from the discretionary trust to the company is not passive income.

Can you please advise what tax rate is applicable if the trading distribution is from a unit trust?

Also, can you confirm that the company tax rate in this scenario is at 27.5% for the year 2020?


For the year ended 30 June 2020 the company tax rate for base rate entities is 27.5% (26% in 2021).

To be a base rate entity your turnover must be less than $50 million and…no more than 80% of your income can be passive income.

Receiving a  discretionary distribution is passive income.

If the company does not qualify as a base rate entity, then the normal 30% company tax rate applies. Given more than 80% of the income is a  discretionary trust distribution and as outlined this is passive income…

The situation here is that income retains its character as it flows through a trust.

This the case whether it is a unit (fixed) or discretionary trust.

Due to this, it is possible for a company receiving a distribution from a trading trust to be a base rate entity.

Since this was TRADING income, we confirm that in the year ended 30 June 2020 the applicable tax rate is 27.5%.