Stage three tax cuts: How much should you pay yourself from your Pty Ltd company in the 2025FY?

Corporate tax rate in Australia

The corporate tax rate in Australia is generally 30% for all entities. However, a lower rate of 25% applies to base rate entities.

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A company is a base rate entity for an income year if:the company’s aggregated turnover for that income year is less than $50 million for the income year, and 80% or less of its assessable income in that income year is base rate entity passive income*.

*Passive income is a type of regular income earned without active participation.. E.g., rental income, gain on securities, dividends, and interest income.

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How much salary should business owners pay themselves?

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Company owners aiming to leverage the benefits of a company structure should ensure that their salary plus superannuation is taxed at an average rate of 25%.

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Note that a minimum super contribution of 11% of your salary is required, with super taxed at 15%—additionally, factor in a 2% Medicare levy into the calculation.

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For the 2024FY, business owners can pay a salary of up to $120,000. At this level, the average tax rate would be approximately 25.4%.

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What change in the salary amount will stage three tax cuts bring?

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Income tax rates will change from 2025FY as follows:

The adjustment in tax rates will enable business owners to increase their salary allocations, potentially up to $150,000, starting from the 2025FY.

Below is a comparison table illustrating the average tax rates for different income brackets in both the 2024FY and 2025FY. Again, these calculations include the super that would be paid ontop of the listed salary amount.

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CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.

For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au

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