Your business structure decides how you are taxed, how much you pay, your legal risk, and how much paperwork you have. In short: a sole trader is simplest and taxed at your personal rates; a company is a separate entity taxed at a flat rate (25% for most small companies); and a trust offers flexibility and asset protection but is more complex. Here is how they compare, so you can see which fits your situation.
Sole trader: simple, but taxed as you
You and the business are the same in law. All profit is added to your personal income and taxed at individual rates, which for 2026-27 run from 15% (on income over $18,200) up to 45% (over $190,000), plus the 2% Medicare levy. It is cheap and easy to set up, but you are personally liable for debts, and as profit grows more of it is taxed at higher rates.
Company: a separate entity, flat tax rate
A company is its own legal entity. It generally pays 25% tax if it is a base rate entity (turnover under $50 million and mostly active income), otherwise 30%. That flat rate can be attractive as profits grow, and a company limits your personal liability. The trade-offs are more cost and admin, and getting money out to yourself (as wages or dividends) has its own tax rules.
Trust: flexible, with asset protection
A discretionary (family) trust holds the business and distributes income to beneficiaries, often to manage tax across a family and to protect assets. It is powerful but complex, with higher setup and running costs. Note that the government has announced a proposed 30% minimum tax on discretionary trusts from 1 July 2028, which would change the tax picture, so trust decisions now need a longer view.
So which one should you choose?
There is no single best answer, it depends on your profit, risk, whether you employ people or family, and your plans to grow. Many businesses start as a sole trader and move to a company or trust as they get bigger. The wrong structure can cost you tax every year, so it is worth reviewing as your business changes.
How MS Financial Services can help
Our Business Advisory and Tax & Compliance teams model the tax and risk under each structure for your actual numbers, and handle the setup or a change of structure if it makes sense. To find the right fit, get in touch.
Frequently Asked Questions
Is a company better than a sole trader for tax?
Not always. A company pays a flat 25% or 30%, which can beat personal rates once profits are high, but a sole trader is simpler and cheaper. The best choice depends on your profit level, risk and plans.
What tax rate does a small company pay?
Most small companies (base rate entities with turnover under $50 million and mainly active income) pay 25%. Other companies pay 30%.
Why do people use family trusts?
For flexibility in how income is distributed and for asset protection. A proposed 30% minimum tax on discretionary trusts from 1 July 2028 would reduce the tax flexibility, so trusts need careful, current advice.
Can I change my business structure later?
Yes. Many businesses restructure as they grow, though changing can have tax and capital gains consequences, so it should be planned with your accountant.
Which structure has the least paperwork?
A sole trader. Companies and trusts involve more registration, reporting and cost, in exchange for other benefits.