Sole trader, company, or trust?
Your business structure has a real tax impact. This page explains the trade-offs and the signals that it's worth revisiting the structure. Setting up, changing or unwinding a structure is executed by your solicitor or chartered tax adviser — we model the numbers behind the decision.
The right structure depends entirely on your situation.
Income level, risk profile, growth plans, family circumstances. The decision is rarely obvious, and the cost of getting it wrong is real.
Below is a clear comparison of the three main structures used by Australian businesses, with the trade-offs each one brings. Use it as a starting point. We can model the tax outcome of each option against your numbers; the structure itself is set up, changed or unwound by your solicitor or chartered tax adviser, not by us.
Want the numbers on your own profit level? Our free entity structure comparison calculator runs sole trader, company and trust side-by-side at any income level using 2025–26 brackets.
Sole Trader
Best for: Freelancers, contractors, side businesses, businesses in early stages with low income.
- Same legal entity as youYou and your business are not legally separate.
- Simplest and cheapestFree ABN registration. Lowest ongoing administration.
- Taxed at personal marginal rateUp to 45% + 2% Medicare levy for income above $190,000.
- Small business income tax offset16% offset, capped at $1,000/year.
- No asset protectionYour personal assets are at risk if the business incurs debt or faces legal action.
Company (Pty Ltd)
Best for: Businesses with profits above ~$100K, businesses needing liability protection, scaling or capital-raising businesses.
- Separate legal entityThe company is legally distinct from you as director or shareholder.
- Profits taxed at flat 25%For base rate entities (turnover under $50M, no more than 80% passive income). 30% otherwise.
- Limited liabilityPersonal assets are generally protected from business debts.
- Profits distributed as dividendsWith franking credits to reduce double taxation.
- Higher set-up and ongoing cost$611 ASIC registration, plus annual review fees and compliance.
Trust (Discretionary / Family)
Best for: Family businesses, tax planning, asset protection, succession planning.
- Trustee holds for beneficiariesThe trust itself generally pays no tax — income flows to beneficiaries.
- Income splittingPowerful tool for distributing among family members on lower tax brackets.
- Strong asset protectionEspecially when combined with a corporate trustee.
- Undistributed income at 47%Trusts are poor for retaining profits — distribute or pay the top rate.
- 30 June distribution minutesMust be signed by 30 June each year.
Signals worth a second look.
When one or more of these apply, the current structure is probably worth revisiting. Changing structure has real cost: it can trigger CGT, GST, stamp duty and professional fees. Get qualified advice before you act.
- Taxable income consistently exceeds $120,000–$150,000 (the gap between personal rates and the 25% company rate becomes significant)
- You need asset protection due to business risk, litigation exposure or contracting requirements
- You are planning to bring in investors, partners, or sell the business
- You want to split income with family members for tax efficiency
- You are expanding into multiple states or internationally
How we fit in: we model the tax impact of staying versus changing — at year one, five years and ten years — so you can take a clear-eyed decision into your solicitor or chartered tax adviser, who handles the legal execution. We do not establish, restructure or unwind entities ourselves.
Model the numbers first.
A 30-minute discovery call is enough to flag whether the current structure still fits the numbers — and whether the cost of changing is justified by the long-run tax outcome. Your solicitor or chartered tax adviser handles any structural change; we model the impact.