The proposal would introduce a new excessive profits tax at a rate of 40% that would apply to company profits that exceed an allowance for a corporate equity threshold with effect from 1 July 2025.

Only post-company tax Australian-sourced profits would be subject to the excessive profits tax and the allowance for corporate equity threshold would equal shareholder equity multiplied by 5% plus the long-term bond rate. 

• Companies would be entitled to a tax offset that would refund the equivalent of the excessive profits tax paid on the first $100 million of turnover.
• The allowance for corporate equity means that if a company’s return on equity is below 5% plus the long-term bond rate, no excessive profits tax would be payable.
  • A company in this situation would accrue non-refundable excessive profits tax credits which could be carried forward to later years and used to offset future excessive profits.
• Companies would be able to look back over the 10 years prior to the introduction of the tax and accumulate a balance of excessive profits credits that could be utilised from the start of the proposal.
• Excessive profits tax would not be deductible for company tax purposes.
• The payment of the excessive profits tax would generate franking credits (excessive profits based) that can be distributed to shareholders.

Resources and fossil fuel companies subject to sector specific excessive profits taxes would be 
exempt from this proposal.