Can I change my business structure later?

Yes, but it can be expensive. Moving from sole trader to company may trigger CGT on business assets. Transferring property into a trust incurs stamp duty. It's much cheaper to choose the right structure from the start. If you're unsure, starting as a sole trader is fine for low-risk, low-revenue businesses.

What's the 25% company tax rate?

Companies with aggregated turnover under $50 million pay a 25% corporate tax rate on profits (base rate entities). This is significantly lower than the top personal marginal rate of 45%. However, to access the money personally, you need to pay yourself a salary (taxed at personal rates) or declare dividends (with franking credits).

You need an ABN if you're running a business or enterprise in Australia. It's free to apply at abr.gov.au. Without an ABN, other businesses must withhold 47% from payments to you. An ABN is different from GST registration — you can have an ABN without being GST-registered if turnover is under $75,000.

§ Tool · tier 2 · independent

Business Structure Advisor.

Get AI-powered advice on the best business structure for your situation — sole trader, partnership, company, or trust. Compare tax, liability, and setup costs.

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Choosing the right business structure is one of the most important decisions you'll make — it affects your tax, personal liability, ability to raise capital, and exit options. In Australia, the main structures are sole trader, partnership, company (Pty Ltd), and trust. Each has different setup costs, ongoing obligations, and tax implications. Many people start as a sole trader and restructure as they grow, but changing later can trigger capital gains tax and stamp duty. Getting it right from the start saves money and hassle.

§ Worked examples

Real-world scenarios

Freelance Developer

Sam is a solo freelance developer earning $130,000/year with no employees and minimal assets.

As a sole trader, Sam pays ~$32,120 in tax (income tax $29,520 + Medicare levy $2,600). As a company paying $80,000 salary + retaining $50,000: company tax $12,500 + personal tax on the salary $16,120 (incl. Medicare levy) = $28,620. The company saves ~$3,500/year PLUS provides liability protection. Recommended: Pty Ltd company.

Property Investment Couple

Lisa and Tom want to build a property portfolio. Lisa earns $180,000, Tom earns $60,000.

A discretionary (family) trust with a corporate trustee allows rental income to be distributed to the lower-income spouse (Tom), saving significant tax. The corporate trustee provides liability protection. Setup cost: ~$2,000. Annual compliance: ~$1,500. Tax saving in year one: $5,000+.

§ FAQ

Questions Australians ask

§ Glossary

Plain-English definitions

Sole Trader

The simplest business structure where you operate as an individual. No separation between personal and business assets. Profits are taxed at your personal marginal rate.

Pty Ltd (Proprietary Limited)

A private company limited by shares. A separate legal entity from its owners (shareholders). Provides limited liability protection and pays the 25% company tax rate.

Discretionary Trust (Family Trust)

A trust structure where the trustee has discretion over how income and capital are distributed among beneficiaries. Popular for tax planning and asset protection.

ABN (Australian Business Number)

A unique 11-digit identifier for businesses operating in Australia. Required for invoicing, GST registration, and interacting with other businesses and the ATO.

§ Pair it with

Related tools

GST Calculator

Calculate GST obligations — mandatory if turnover exceeds $75,000.

Income Tax Calculator

Compare personal tax rates to the 25% company rate.

Break Even Calculator

Calculate when your business will become profitable.

How to use

01Select your type of business activity.
02Choose your expected annual revenue range.
03Indicate how many owners/partners are involved.
04Note whether you have significant personal assets to protect.
05Select whether you'll have employees.
06Choose your long-term business goal.

Key info

Sole trader: simplest, cheapest ($0 to set up), but no liability protection and profits taxed at personal rates (up to 45%).
Company (Pty Ltd): $636 ASIC registration, 25% company tax rate, limited liability, but more compliance and can't easily access profits.
Trust: $500-$2,000 to set up, great for income distribution and asset protection, but complex and not suitable for all businesses.
Partnership: easy to set up, shared income, but each partner is jointly liable for all debts.

Pro tips

If your profit exceeds ~$90,000, a company structure (25% tax) starts saving you tax compared to a sole trader (marginal rate 30%+).
A family trust with a corporate trustee gives you BOTH flexibility (distribute income) AND liability protection (company structure).
Register for GST immediately if you expect to exceed $75,000 turnover — it's mandatory, and backdating is messy.
Always get professional advice before setting up a trust or company — the upfront cost ($1,000-$2,000) saves far more in the long run.

Avoid these

Staying as a sole trader too long when profits are high — paying 37-45% personal tax instead of 25% company tax.
Setting up a company when a sole trader is fine — unnecessary compliance costs for a small side business.
Not understanding that company profits belong to the company — you can't just take money out; it must be salary, dividends, or a loan (with strict rules).
Choosing a partnership without a written partnership agreement — disputes are inevitable without clear rules.

Disclaimer: Estimates only. Interest rates, fees and policies change frequently. Always verify with lenders directly. General information, not personal financial advice.

Last updated · August 2026