Business Structure Comparison Calculator

2025-26 ATO rates

Business Structure Comparison Calculator

Sole trader vs company vs partnership vs trust — see your real after-tax outcome at your actual profit.

Sole trader, company, partnership, and discretionary trust aren't just legal labels — each one taxes the same business profit completely differently. A company pays a flat 25-30% rate before any money reaches you personally. A trust can split income across family members in lower brackets. A sole trader pays your personal marginal rate on every dollar, with no splitting at all. Enter your profit below to see where you actually land.

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Please enter your annual business profit to calculate.
› Model a trust/partnership split with a second person (optional)
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Trust/partnership columns will split the business profit 50/50 with this person.
Best after-tax outcome at this profit level
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Before structure running costs are subtracted.
StructureTax paidNet in pocket
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Missing profit figure

Please enter your annual business profit before calculating — it's the required field.

The four structures at a glance

  • Sole trader: business profit is your personal income, taxed at your individual marginal rate. Simplest, cheapest to run, no asset protection.
  • Company (Pty Ltd): a separate legal entity taxed at a flat 25% (base rate entity) or 30%. Profit you withdraw is taxed again at your marginal rate, but franking credits prevent true double-taxation. The real benefit is retaining profit inside the company at 25-30% instead of distributing it all at your marginal rate.
  • Partnership: profit is split between partners per the partnership agreement; each partner pays tax on their share at their own marginal rate. No entity-level tax, but full personal liability for each partner.
  • Discretionary trust: the trustee can distribute income to any eligible beneficiary each year, with each share taxed at that beneficiary's marginal rate. Undistributed income is taxed at the top 45% rate.
Why a company can beat a sole trader at higher profit
Sole trader: full profit taxed at your marginal rate immediately
Company: profit taxed at 25-30% — only taxed again if/when you withdraw it
Worked example — $180,000 profit, no other income: as a sole trader, tax ≈ $51,667 (30% bracket reached). As a company retaining the profit, tax is just 25% = $45,000 — a real deferral advantage, as long as you don't need to withdraw it all personally this year.

Why a trust often wins at higher profits with a low-income partner

A discretionary trust's biggest advantage is splitting income to beneficiaries in lower tax brackets — typically a spouse with little or no other income. At $200,000 profit split evenly between two people with no other income, each pays tax on $100,000 in the 30% bracket instead of one person paying tax on the full $200,000, where a meaningful chunk would sit in the 37% bracket. A partnership can achieve something similar, but the split is fixed by the partnership agreement rather than flexible year-to-year like a trust distribution.

The running costs that erase the "saving" on paper

StructureTypical extra annual running cost vs. sole trader
Sole trader$0 (baseline)
Company (Pty Ltd)~$3,200/yr (ASIC fee + company accounting/tax return)
Partnership~$500-1,500/yr (partnership return + agreement)
Discretionary trust~$1,500-3,500/yr (trust deed, trustee company, trust tax return, annual resolutions)

A company or trust only makes sense once the tax saving clearly exceeds these running costs — which is usually somewhere above $80,000-135,000 of profit, not at the lowest income levels.

Liability is a separate question from tax

Sole traders and partners carry unlimited personal liability — your house, car, and savings are exposed if the business is sued or can't pay its debts. A company gives genuine limited liability for the shareholders (though directors can still be personally liable in specific circumstances). A trust offers strong asset protection since the trust, not you personally, owns the business assets. Don't choose a structure on tax alone if liability exposure is a real risk in your industry.

For your personal side of the numbers, see the income tax calculator and the quarterly estimated tax calculator for managing PAYG instalments under any structure.

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Frequently asked questions

At what profit level does a company structure start saving tax?+
The deferral advantage of a company's 25% rate becomes meaningful once your profit consistently exceeds the top of the 30% personal bracket ($135,000). Below that, the ~$3,200/year extra running cost of a Pty Ltd usually outweighs the tax saving.
Is a trust always better than a company for tax?+
No. A trust's advantage comes specifically from splitting income to beneficiaries on lower tax rates. If there's no lower-income beneficiary to distribute to, or all profit needs to stay in the business, a company's flat low rate and retained-earnings deferral can be more effective.
What happens if a trust doesn't distribute all its income?+
Any income not distributed to a presently-entitled beneficiary by year-end is taxed to the trustee at the top marginal rate of 45% — there's no benefit to "retaining" profit in a discretionary trust the way there is in a company.
Can I switch structures later as my business grows?+
Yes, and it's common to start as a sole trader and incorporate later once profit and risk justify it. However, transferring an existing business into a company or trust can trigger capital gains tax and stamp duty, so the switch is best planned with an accountant rather than done reactively.
Do partners in a partnership get the small business income tax offset?+
Yes. Sole traders and partners in a partnership can both access the small business income tax offset — a 16% offset on the tax attributable to business income, capped at $1,000 per person per year. Companies and trust beneficiaries don't get this specific offset.
Does a company give me real asset protection?+
Generally yes for shareholders — your personal assets are separate from the company's. However, directors can still be personally liable in specific situations, such as trading while insolvent, personal guarantees on loans or leases, or breaches of director duties.
What's the difference between a partnership and a trust for income splitting?+
A partnership's profit split is fixed by the partnership agreement and generally can't be varied year to year without changing the agreement. A discretionary trust's distributions can be decided fresh each year, giving more flexibility to respond to each beneficiary's changing income.
This calculator provides general estimates only and is not tax, legal, or financial advice. It models 2025-26 ATO individual and company tax rates and a simplified trust/partnership 50/50 split, and does not account for franking credit refunds in detail, Division 7A loan rules, small business CGT concessions, state-based duties on restructuring, or your specific industry's liability exposure. Confirm your structure decision with a registered tax agent or accountant.

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