Business Structure Adviser
FY 2025-26Compare Sole Trader, Pty Ltd Company, and Discretionary Trust at your projected profit level. Slide the bar or type your number, then tick the boxes that apply to your situation.
Trust + bucket company strategyAdvanced
Distribute up to a per-beneficiary threshold to family at personal rates, then route the rest to a Pty Ltd corporate beneficiary ("bucket company") taxed at 25%.
- At $120,000 profit with no spouse to split with and no growth/asset-protection drivers, a Sole Trader is often still the simplest and lowest-cost option. As your business grows, revisit this decision.
You operate the business in your own name under an ABN. Simplest and cheapest to start.
Best for
Owner-operator plumbers in their first 1–3 years, side jobs, or low-revenue work where simplicity matters most.
Pros
- Cheapest and fastest to set up — typically up and running with an ABN within a day.
- Lowest ongoing accounting and compliance costs.
- Full control — every business decision is yours.
- Tax-free threshold ($18,200) plus the new 16% bracket up to $45,000 means low effective tax on modest profits.
- Business losses can be offset against other personal income (subject to non-commercial loss rules).
- No need to keep separate company accounts or hold director meetings.
Cons
- Unlimited personal liability — your personal assets (house, car, savings) are exposed if the business is sued or insolvent.
- All profits are taxed at your personal marginal rate, which reaches 45c + 2% Medicare on income over $190,000.
- Limited ability to split income with a spouse or family member legally.
- Cannot retain profits at the lower 25% company rate to fund growth.
- Selling the business is harder — you cannot transfer shares; the buyer must buy individual assets.
- Some clients (especially commercial / government) prefer to engage a Pty Ltd company.
Setup cost
~$50
Annual cost
~$1,500
A separate legal entity that you own through shares. Limited liability and a flat 25% tax rate on company profits.
Best for
Established plumbing businesses with consistent profits over $90,000–$120,000, employees, or significant business assets and contracts.
Pros
- Limited liability — your personal assets are generally protected from business debts and lawsuits.
- Flat 25% company tax rate (base rate entity) — much lower than the top personal marginal rate of 45%.
- Profits can be retained in the company to fund growth, equipment, vehicles, or future tax planning.
- Franking credits — when you eventually pay yourself a dividend, the company tax already paid is credited to you (avoids double tax).
- Easier to bring in a business partner or sell — shares can be transferred.
- More credibility with commercial clients, builders, and tier-one contractors.
- Director can pay themselves a wage AND a dividend AND superannuation — flexible remuneration mix.
Cons
- Higher setup cost (~$1,200) and annual compliance cost (~$4,500+) than sole trader.
- Strict ASIC obligations — annual review, director ID, registered office, financial records.
- Director penalty notice (DPN) regime makes you personally liable for unpaid PAYG, super, GST, in some cases.
- Cannot easily access company profits below the personal marginal rate cap without paying yourself a wage or dividend (which triggers personal tax).
- Personal Services Income (PSI) rules can attribute company income back to you personally if you do not pass the ATO PSI tests (very common for owner-operator plumbers).
- Losses are trapped in the company — they cannot offset your personal income.
Setup cost
~$1,200
Annual cost
~$4,500
A trust holds and runs the business, with a Pty Ltd company as trustee. You distribute profits to beneficiaries each year.
Best for
Plumbers with a spouse or adult family members on lower incomes, established businesses with profits over $180,000, and those wanting maximum tax flexibility plus asset protection.
Pros
- Powerful income splitting — distribute trust profits each year to family members in lower tax brackets (spouse, adult children studying, retired parents).
- Excellent asset protection — beneficiaries have no fixed entitlement; creditors of a beneficiary cannot reach trust assets.
- 50% CGT discount available on the eventual sale of business assets held >12 months.
- Flexibility — you decide each year who gets what; the deed allows wide discretion.
- Combines well with a Pty Ltd corporate trustee for limited liability of the trustee.
- Can stream different types of income (capital gains, franked dividends) to the most appropriate beneficiary.
Cons
- Most expensive structure to set up (~$2,500) and run (~$6,500+/year).
- Cannot retain profits at the company rate inside the trust — undistributed income is taxed at 47% top marginal rate.
- Losses are trapped in the trust — they cannot offset your personal income.
- Personal Services Income (PSI) rules and the Section 100A 'reimbursement agreement' rules now heavily restrict distributions to adult family members who don't actually receive the cash benefit.
- Beneficiaries under 18 are taxed at penalty rates on most distributions (effectively up to 45%).
- Trust deed must be carefully drafted, distribution minutes must be signed each year before 30 June, and trustee duties must be observed.
- Some lenders and government contracts are reluctant to deal with trusts.
Setup cost
~$2,500
Annual cost
~$6,500
| Aspect | Sole Trader | Pty Ltd Company | Discretionary Trust (with Corporate Trustee) |
|---|---|---|---|
| Tax treatment | All net business profit is added to your personal taxable income and taxed at marginal individual rates plus the 2% Medicare levy. Losses can offset other income (subject to non-commercial loss rules in s.35 ITAA 1997). | Company pays a flat 25% tax on net profit (as a base rate entity, turnover < $50M). When profits are paid out as dividends, the franking credits attach so you don't pay tax twice on the same dollar. | The trust itself pays no tax provided all income is distributed to beneficiaries each year before 30 June. Each beneficiary pays tax at their own marginal rate. Undistributed income is taxed at 47% in the trustee's hands. |
| Legal liability | Unlimited personal liability. Creditors and litigants can pursue your personal assets, including the family home (unless held in another entity). | Limited liability — shareholders are only liable up to their unpaid share capital. Director Penalty Notice regime can pierce this for unpaid PAYG, super, and GST. | The trustee is personally liable for trust debts but has a right of indemnity from trust assets. Using a Pty Ltd corporate trustee limits liability to the trustee company. |
| Asset protection | None — your personal assets are fully exposed. | Strong — provided you do not give personal guarantees and you comply with director duties. Pair with a separate trust or holding entity for stronger protection of accumulated wealth. | Very strong — assets held in the trust are not personal property of any beneficiary, so they are generally out of reach of personal creditors of beneficiaries. |
| Retained earnings | Cannot retain profits at the company rate. Every dollar of profit flows to your personal return whether you draw it or not. | Excellent — retain at 25% in the company, deploy into trucks, tools, property, or simply hold for future planning. | Weak — undistributed income attracts 47% trustee tax. The common workaround is to distribute to a 'bucket' Pty Ltd company at 25%, but Section 100A scrutiny applies. |
| Income splitting | Limited. You can pay your spouse a reasonable wage for genuine work performed, but you cannot 'distribute' profit to family members. | Moderate — you can issue different share classes to family members (subject to anti-avoidance rules) and pay reasonable wages or dividends. | Excellent — the central reason most established trades use this structure. Subject to PSI and Section 100A. |
Important — please read before acting
GENERAL EDUCATIONAL GUIDANCE ONLY. The figures above use simplified assumptions and the ATO 2025-26 individual tax brackets and 25% base rate company tax. They DO NOT account for GST, super, FBT, payroll tax, CGT, the Personal Services Income (PSI) rules, Section 100A reimbursement agreements, Division 7A loans, asset protection planning beyond the structure itself, your existing entities, or your personal circumstances. Choosing or restructuring a business entity is a regulated activity. You MUST consult a registered tax agent, accountant, or solicitor before making any structural decision. TradeDesk accepts no responsibility for decisions made based on this output.
Tax law changes regularly. Figures shown reflect the ATO published rates for the 2025-26 financial year and may not reflect amendments after publication.