Base Rate Entity in Australia – Definition, Eligibility, and Tax Rate Benefits

A Base Rate Entity (BRE) is an Australian company that qualifies for the reduced corporate tax rate of 25% instead of the standard 30%. Eligibility is determined by two key criteria: turnover and passive income percentage.

Understanding your Base Rate Entity status is essential for correct tax planning, financial forecasting, and ATO compliance. At Ozobooks, we help businesses identify BRE eligibility and apply the right tax rate.

Eligibility Criteria for Base Rate Entity (2025)

To be classified as a BRE, your company must:

1. Have an aggregated turnover of less than $50 million
   
2. Earn no more than 80% of its income from passive sources, such as:
   
   • Rent
     
   • Interest
     
   • Dividends
     
   • Royalties
     
   • Capital gains
     

If both conditions are met, your company is entitled to the 25% tax rate.

Examples of Passive vs Active Income

Income Type	Passive (Excluded)	Active (Eligible)
Client services	❌	✅
Rental income	✅	❌
Selling products	❌	✅
Share dividends	✅	❌
Business operations	❌	✅

Why Base Rate Entity Status Matters

• Lower tax rate (25%) reduces liability
  
• Affects financial forecasting and dividend planning
  
• Influences franking credits and distributions
  
• Non-compliance may trigger ATO audits or penalties
  

How Ozobooks Helps

• Analyses your income types and turnover
  
• Reviews financials for compliance risk
  
• Determines if you qualify for BRE
  
• Applies correct tax treatment in company tax return
  

FAQ:

Q1: Is BRE status applied automatically?
No. You must assess eligibility annually based on financials.

Q2: What if I qualify one year but not the next?
The ATO applies the rate based on each income year. It may change year-to-year.

Q3: Can trusts or partnerships be Base Rate Entities?
No. Only companies can be classified as BREs.

Q4: What’s the impact on franking credits?
If you’re a BRE, your franking credits are based on 25% not 30%.