Small business guide
Sole trader or company? Choosing a business structure in Australia (2026)
The short answer
A sole trader is the simplest and cheapest: business income is taxed as your own, at personal rates, with the first $18,200 tax-free12. A company is a separate entity that pays its own tax, 25% for most small companies in 2025-26, with no tax-free threshold31. It costs $636 to register with ASIC and $342 a year after that4. Which suits you depends on your income, your risk and your plans.
The four structures at a glance
| Structure | How it is taxed | Set-up |
|---|---|---|
| Sole trader | Part of your personal income, at individual rates1 | ABN is free5 |
| Partnership | The partnership lodges a return; each partner pays tax on their share6 | ABN is free5; a written partnership agreement is common |
| Company | The company pays its own tax: 25% for a base rate entity, otherwise 30% (2025-26)3 | $636 ASIC registration, then $342 a year4 |
| Trust | Beneficiaries entitled to the income pay tax on their share; if none is, the trustee is generally taxed at the highest rate7 | A trust deed, usually drawn up by a lawyer or accountant |
Sole trader: simplest, but it is all you
As a sole trader you and the business are the same person for tax. Your business profit is added to any other income and taxed at individual rates: nil on the first $18,200, then 15 cents in the dollar above that, rising through the brackets2.
It is cheap to start and simple to run, which is why most small businesses begin this way. The trade-off is that you are personally responsible for everything the business owes.
Not sure which suits you?
An accountant can run your numbers both ways. Tell us once and hear from up to three who cover your postcode. Free, no obligation.
Company: separate, with more paperwork
A company is its own legal entity. For 2025-26 a company pays 25% if it is a base rate entity, meaning aggregated turnover under $50 million and no more than 80% of its income from passive sources such as interest and rent; otherwise it pays 30%38. There is no tax-free threshold1.
Money the company earns belongs to the company. Getting it to you, as wages or dividends, has its own tax rules, which is a large part of what an accountant helps with.
Directors carry legal duties, and for some company tax debts the ATO can make directors personally liable. See what to do about an ATO debt.
What it costs to register
| What | Fee (from 1 July 2026) |
|---|---|
| ABN | Free5 |
| Business name, 1 year | $474 |
| Business name, 3 years | $1084 |
| New proprietary company | $6364 |
| Company annual review | $342 a year4 |
Good to know: You only need to register a business name if you trade under a name other than your own. Accountants and lawyers charge for set-up on top of the government fees: see what accountants charge.
Questions to take to an accountant
- At my expected profit, how would my tax compare as a sole trader and as a company?
- What would it cost each year to run a company, including your fees and the ASIC review?
- If I start as a sole trader, when would it make sense to change, and what would moving cost?
- Do I need to register for GST from day one? (See the $75,000 rule.)
Who can help
Questions people ask
Is a company always cheaper on tax than a sole trader?
No. A company pays 25% or 30%3, while a sole trader pays nothing on the first $18,200 and lower rates on the next brackets2. At lower profits a sole trader can pay less. An accountant can compare the two at your numbers.
How much does it cost to set up a company in Australia?
ASIC's fee to register a proprietary company is $636, and the annual review fee is $342 a year, from 1 July 20264. Professional fees for the set-up are extra.
Do I need an ABN to be a sole trader?
If you are carrying on a business, you will generally need one. Registering for an ABN is free5.
Can I change from a sole trader to a company later?
Yes, and many businesses do. Moving the business across can have tax consequences, so it is worth asking an accountant before you do it.
Talk it through with a professional
Tell us once and hear from up to three accountants who cover your postcode. Free, no obligation, and FIZO never recommends one over another.
Sources
- business.gov.au, Tax differences between a sole trader and a company
- ATO, Tax rates for Australian residents (2026-27)
- ATO, Company tax rates 2025-26
- ASIC, Fees for commonly lodged documents (from 1 July 2026)
- business.gov.au, Register for an Australian business number (ABN)
- business.gov.au, Partnership
- ATO, Trust income
- ATO, Tips to get your base rate entity status correct
FIZO is a directory, not a tax or legal adviser. Rules and thresholds change: check the source, or ask a registered professional about your own business.