The Structure You Choose Matters More Than You Think
Most people starting a business in Australia pick "sole trader" because it's easiest. And for many, that's the right call. But the structure you choose affects how much tax you pay, whether your personal assets are at risk, and how easy it is to grow.
The Four Main Structures
1. Sole Trader
No legal separation between you and your business. You are the business.
- Report all business income on your personal tax return
- Personally liable for all debts
- Tax at individual rates (0–45%)
2025–26 Individual Tax Rates:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Best for: Freelancers, solo tradies, side hustles, micro-businesses.
Pros: Free to set up (just ABN), simplest tax, full control, easy to wind down.
Cons: Unlimited personal liability, higher tax above ~$50K profit, harder to raise capital.
2. Partnership
Two or more people running a business together. The partnership doesn't pay tax — each partner reports their share on their personal return.
Critical: Partners are jointly and severally liable — each partner can be held responsible for the full amount of business debts, not just their share.
Best for: Professional practices, husband-and-wife businesses, shared ventures.
3. Company (Pty Ltd)
A separate legal entity. The company exists independently from its directors and shareholders.
- Company tax rate: 25% (for turnover under $50M)
- Profits distributed as dividends with franking credits
- Limited liability — personal assets generally protected
Best for: Businesses earning over ~$80–100K profit, those needing asset protection, businesses planning to grow or take investment.
Costs: ASIC registration + $576/year annual fee. More complex tax returns.
4. Trust (Discretionary/Family)
A trustee holds assets for the benefit of beneficiaries. The most common type is a discretionary (family) trust.
- Income distributed to beneficiaries at their individual rates
- Excellent asset protection
- Flexible income splitting between family members
- Undistributed income taxed at top marginal rate (45%)
Best for: Family businesses, high-income earners, businesses with significant assets.
Costs: $1,500–$3,000+ to set up, plus ongoing compliance.
Quick Comparison
| Feature | Sole Trader | Partnership | Company | Trust |
|---|---|---|---|---|
| Setup cost | Free | Low | ~$500–$1K + $576/yr | $1,500–$3,000+ |
| Personal liability | Unlimited | Joint & several | Limited | Protected |
| Tax rate | 16–45% | 16–45% | 25% | Individual rates |
| Asset protection | No | No | Yes | Yes |
| Income splitting | No | Yes | Via dividends | Yes (flexible) |
| Complexity | Low | Medium | Medium-High | High |
How to Register an ABN
- Go to abr.gov.au
- Provide your TFN, identity details, business activity, structure type
- Most applications processed immediately — you get your 11-digit ABN on screen
Business name registration (trading as a name other than your own): $44/year or $102/3 years via asic.gov.au.
GST Registration
Mandatory if: turnover is $75K+ ($150K for not-for-profits), or you provide taxi/ride-sharing services.
Voluntary registration is beneficial if you buy significant materials/equipment — you claim back the GST on purchases.
When to Change Structure
Sole trader → Company when:
- Profit consistently exceeds $80–100K
- You're taking on significant financial risk
- You want to hire employees
- You're seeking investment
- You want to sell the business eventually
Getting professional advice before changing structures is essential — CGT and stamp duty implications vary.
How OneBookPlus Helps
- Invoicing with ABN and GST — automatically shown on every invoice
- Expense tracking with categorisation for tax returns
- BAS-ready GST reports
- Payroll with award rates, PAYG, super, and STP
- Multi-entity support for multiple businesses
Start free at onebookplus.com.au.