Australia’s corporate tax landscape is shifting again in 2025, with new rates, compliance requirements, and policy updates that every business—from startups to ASX-listed giants—should watch closely. With the Albanese government’s focus on productivity, multinational tax fairness, and green investment, the stakes are high for companies of all sizes. Whether you’re a finance director, small business owner, or entrepreneur, understanding this year’s tax settings is critical for managing cash flow and keeping your business future-ready.
Corporate Tax Rates in 2025: What’s Changed?
The standard corporate tax rate remains at 30% for large companies, but the ‘base rate entity’ (BRE) tax of 25% continues to benefit eligible small and medium businesses. In 2025, the turnover threshold for BRE status holds at $50 million, but the ATO is increasing scrutiny of companies that straddle the eligibility line, particularly around passive income tests and related-party transactions.
- 30%: Large companies and those not meeting BRE criteria
- 25%: Companies with aggregated turnover under $50 million, and less than 80% of income as passive
There’s growing debate about Australia’s high corporate tax rate compared to OECD peers—especially as Singapore, the UK, and the US move to attract foreign investment with lower rates. However, the 2025 Federal Budget did not deliver rate cuts for big business, instead focusing on closing loopholes and enhancing compliance.
Key Policy Updates and International Tax Reforms
2025 is a landmark year for cross-border tax, with Australia rolling out new measures in line with the OECD’s global minimum tax (Pillar Two). Multinationals with global revenue above €750 million are now subject to a 15% minimum effective tax rate, regardless of where profits are booked. The ATO’s expanded Multinational Anti-Avoidance Law (MAAL) and Diverted Profits Tax (DPT) are targeting aggressive tax planning, especially in digital and intangible-heavy sectors.
- Global Minimum Tax (15%): Applies to large multinationals from 1 July 2025
- Expanded MAAL & DPT: More detailed reporting, increased penalties for avoidance
- Increased ATO data-matching: Focus on transfer pricing, hybrid mismatch arrangements
For tech, pharma, and e-commerce groups, the days of routing profits through tax havens are numbered. Australian subsidiaries must prepare for tighter enforcement and potentially higher effective tax rates.
Compliance, Deductions, and Green Incentives
ATO compliance activity is at an all-time high in 2025, with targeted audits on R&D tax incentive claims, thin capitalisation, and related-party loans. The ATO’s use of AI-powered analytics means errors or aggressive positions are more likely to be flagged for review.
On the upside, businesses investing in clean energy or sustainability projects can access new incentives:
- Small Business Energy Incentive: Up to $20,000 bonus deduction for eligible electrification and efficiency upgrades
- Instant Asset Write-Off: Temporary extension for assets under $20,000, but only for businesses with turnover under $10 million
- Expanded Patent Box regime: Preferential tax rate on income from medical and low-emissions technology patents (for eligible companies)
Every dollar saved counts. Companies should review their structure, financing, and capital investment plans to ensure they’re maximising available deductions and incentives—without falling foul of new substantiation rules.
Real-World Example: SME Navigates the 2025 Tax Maze
Consider a Melbourne-based SME with $15 million turnover in 2025. They invest $100,000 in solar panels and energy-efficient lighting for their warehouse. Thanks to the Small Business Energy Incentive, they can claim a $20,000 bonus deduction, lowering their taxable income. However, the ATO queries their R&D claim for a new logistics software platform, requiring detailed substantiation. The business consults its tax adviser early and avoids penalties, highlighting the importance of proactive compliance in the current environment.
Preparing for the Future: What Should Businesses Do Now?
- Review corporate structure—ensure BRE eligibility and correct grouping for tax purposes
- Strengthen documentation for all deductions, especially R&D and related-party transactions
- Stay alert to ATO guidance and legislative updates—especially for international operations
- Model cash flow impacts of upcoming tax payments, audits, or reduced incentives
With the pace of reform accelerating, successful businesses are those that keep tax strategy on the boardroom agenda—not just at year-end.
