Sole Trader vs Company in Australia: Which Structure Suits You?
The structure question shapes your tax, your risk and your admin for years. Here's the honest comparison - and when to get advice.
"Should I be a sole trader or a company?" is the first real decision every new Australian business owner faces. There's no universal right answer - it depends on your income, your risk and your plans - but there is a wrong approach: picking one without understanding what you're signing up for.
Sole trader: simple and cheap
As a sole trader, the business is you. You get an ABN (free), register a business name if you're trading under one, and your business income goes on your personal tax return. Setup costs almost nothing and the admin is light - which is why most tradies and service businesses start here.
The trade-off is liability. There's no legal separation between you and the business: if the business is sued or can't pay its debts, your personal assets are on the table. Good insurance reduces that risk, but doesn't remove it.
Company: separation and credibility, at a cost
A company is a separate legal entity. It owns the business, earns the income and pays its own tax (at the company rate). Your liability as a director and shareholder is generally limited - the company's debts are the company's, with exceptions like director guarantees and unlawful conduct.
The costs are real: several hundred dollars to register with ASIC, annual review fees, a separate company tax return, and stricter record-keeping. You'll almost certainly want an accountant handling it, which adds to the yearly bill.
The tax question
Companies pay a flat company tax rate, while sole traders pay at personal marginal rates. At lower incomes, personal rates often work out fine; as profit grows, the company structure can become more tax-effective - but only if you're leaving money in the business, because taking it out as wages or dividends has its own tax consequences. This is genuinely accountant territory: the right answer depends on your numbers.
A practical way to decide
- Starting out, testing an idea, modest income? Sole trader is usually the sensible start - cheap, simple, and you can restructure later.
- Higher risk work, bigger contracts, or clients who require it? A company may be worth the cost from day one.
- Profit growing well past what you need to live on? Time to talk to an accountant about whether a company saves you money.
Whatever structure you choose, the rest of the setup is the same: a name, an ABN, insurance, and - the part that actually brings in work - a professional online presence so customers can find you on Google. The Business Starter service handles the launch side together: name, domain, website and getting found. Note that for legal, tax and accounting decisions we always point you to a qualified professional - we handle the business launch, not the legal advice. Already trading? The $45/week website covers your website, hosting and ongoing management. And for the full setup order, see how to start a business in Australia.
Structure decision checklist
- Estimated your likely first-year income
- Thought about the risks in your type of work
- Checked whether clients or contracts require a company
- Priced the ongoing cost of a company (ASIC fees + accountant)
- Booked a session with an accountant if the decision isn't obvious
- Sorted the launch basics: name, domain, website, insurance
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- Can I change from sole trader to company later?
- Yes, and many businesses do exactly that as they grow. It involves registering the company, getting a new ABN for it, and moving the business across - an accountant can run the process. Starting as a sole trader doesn't lock you in.
- Is it cheaper to be a sole trader?
- For setup and admin, yes - significantly. An ABN is free and your business income goes on your personal tax return. A company has ASIC registration fees, annual review fees and usually higher accounting costs. Whether it's cheaper on tax depends on your profit level.
- Do I need an accountant as a sole trader?
- Not legally, but a good accountant usually pays for themselves - especially at tax time and when big decisions come up. At minimum, get advice when you're choosing your structure and when your income jumps significantly.
Written by Mike - Web Guy Mike
I build and look after websites for Australian tradies and small service businesses. Every site is built by me - no outsourcing, no account managers. More about Mike.