Small businesses will be the first to benefit, while major corporations have been promised their first tax rate cut in two decades - but not until 2023.
From July 1, the tax rate for around 870,000 businesses with an annual turnover under $10 million will drop from 30 per cent to 27.5 per cent.
That cut will gradually be handed out to larger businesses in the next six years, and the company tax rate then lowered over four years to 25 per cent.
Treasurer Scott Morrison said this will encourage businesses to invest and expand, creating more jobs and lifting economic growth by just over one per cent in the long term.
"Higher investment will lead to permanent increases in wages, support jobs, increase consumption and result in higher living standards," he said.
However, former Reserve Bank governor Bernie Fraser recently warned lower company tax rates will not automatically trigger investment and growth.
They are also being delivered as the government's revenue from company tax falls in 2015/16, primarily because of the mining sector's downturn and significantly weaker commodity prices.
The changes are forecast to shrink the government's revenue by $5.3 billion over the next four years, which it says will be offset by a crackdown on tax avoidance by multinational corporations and changes to superannuation concessions.
Mr Morrison said lower company tax rates will improve the international competitiveness of local businesses, as the current tax rate of 30 per cent is the seventh highest among the 34 OECD countries, and much higher than in Asian countries.
The tax breaks are likely to be welcomed by the business sector, though the Business Council of Australia had been seeking an immediate cut to the company tax rate.
Meanwhile, instant tax writeoffs for asset purchases worth up to $20,000 that were introduced in the 2015 budget for small businesses with turnovers of under $2 million will now be available to bigger firms with revenues of up to $10 million.
The federal government is also expanding tax breaks for an estimated 2.3 million unincorporated small businesses, such as sole traders, lifting their tax discount from five to eight per cent on July 1.
That discount is then set to gradually rise to 16 per cent by 2026.
There will also be changes to simplify GST reporting for small business owners from July 2017, allowing them to focus on their operations rather than filling out forms, the government said.
