Compare the estimated tax treatment of business profit as a sole trader and through a company to see how structure can change the timing and amount of tax.
A sole trader and a company are taxed differently. A sole trader includes net business income in their individual tax return and pays tax at individual marginal rates. A company is a separate taxpayer and generally pays company tax at 25% if it qualifies as a base rate entity or 30% otherwise, subject to the rules that apply.
A lower company tax rate does not automatically mean a lower overall tax cost. If company profits are later paid to an individual as salary or dividends, further tax consequences can arise, with franking credits relevant to dividend taxation. Structure also affects administration, legal liability, superannuation, access to losses and the cost of extracting profits. Use the calculator as an initial tax comparison, not as a complete structure recommendation.
See why company tax rates alone do not decide which business structure is better.
No. The answer depends on profit level, how much cash is retained or withdrawn, the company’s tax rate, the owner’s other income and how profits are ultimately paid out. Non-tax factors can be just as important.
Net business income is generally included in the individual’s assessable income and taxed at the individual’s marginal tax rates after taking into account the broader tax return.
The company is a separate taxpayer. A qualifying base rate entity is generally taxed at 25%, while other companies are generally taxed at 30%, unless a special rule applies.
Dividends can create personal income tax consequences. Franking credits may recognise company tax already paid, but an individual can still have top-up tax or, in some circumstances, a refund depending on their overall tax position.
No. A restructure can have CGT, GST, duty, asset protection, payroll, superannuation and administrative consequences. The numbers should be reviewed alongside the commercial and legal implications before making a change.
We can model the tax outcome alongside profit extraction, compliance costs and the practical consequences of changing structure.
