The Taxation Act defines a company as including all bodies or associations corporate or unincorporate but excluding partnerships as defined.

A company is a taxable entity distinct and separate from its shareholders. However, in certain circumstances, where a company has been rendered unable to pay its tax liability following a sale of shares, the Commissioner may recoup the unpaid tax from vendor shareholders. Note that some public unit trusts are treated as if they were companies for tax purposes.

Resident and non-resident companies

As in the case of individuals, it is necessary to determine whether or not a company is a resident of Australia for tax purposes. This is important because:

• Generally speaking, resident companies are liable to tax on their total income from sources both within and outside Australia, whereas non-resident companies are liable only on their Australian-source income
• The imputation system applies to dividends paid by Australian resident companies
• Special rules apply in determining income derived form non-resident companies

Under the Act a company is obliged to lodge a return in accordance with requirements specified in the Government Gazette.

A company is normally required to lodge its return by the date on which it is required to pay its final tax liability.

Companies are also normally required to lodge separate statements containing details of shareholders, debenture holders, dividends and interest payments made during the year.

Under the self assessment system a Company must self assess the amount of tax payable in its return. The Commissioner will normally issue a formal notice of assessment to the Company after lodgement of the return. Company Returns may be subject to audit by the Australian Taxation Office.

From 1 July, 2002 wholly-owned Company Groups may elected to lodge one Consolidated Group Income Tax Return.

A company which fails to file a return or otherwise fails to comply with a taxation law is liable for a fine or penalty tax. Any person responsible for a breach by a company of the taxation laws may also be liable to prosecution.

For 2007/08 the tax rate is 30%; this rate continues to apply until Parliament otherwise decides.

Need more information?

If so, please consult the Australian member firm in your area .