Sole Trader vs Company Calculator
Compare the after-tax take-home pay for sole trader versus company structures in Australia for 2024–25. Includes franking credits and dividend tax.
Note: This is a simplified comparison. Company structures have additional compliance costs (ASIC fees, accountant fees) that are not included here. Retained profits in the company are not accessible without triggering further tax.
Sole Trader vs Company — Which is Better?
Choosing between a sole trader and company structure is one of the most important decisions for Australian business owners. Tax is a major factor but not the only one. Here's what you need to know.
Sole Trader
As a sole trader, all business profit is your personal income. You pay tax at individual marginal rates (up to 45%) plus 2% Medicare levy. The benefit: simplicity, low setup cost, and access to the full tax-free threshold ($18,200) and low-income offsets. The disadvantage: high marginal rates at higher incomes.
Company Structure
A company (Pty Ltd) pays tax at 25% (for base rate entities). Profits distributed as fully franked dividends carry franking credits that reduce the shareholder's personal tax. At high income levels, this can save significant tax — but you cannot access retained profits without a dividend (or director salary), and compliance costs are higher.
The Crossover Point
Broadly, a company structure tends to become tax-advantageous once your business profit exceeds ~$120,000–$150,000 and you can afford to retain some profits in the company. Below that level, the tax saving often doesn't outweigh compliance costs.
Other Considerations
- Asset protection: Companies provide limited liability; sole traders do not
- CGT discount: Individuals get a 50% CGT discount on assets held 12+ months; companies do not
- Trust structures: Discretionary trusts offer additional flexibility not modelled here
- Setup and compliance: Companies cost $538 to register with ASIC plus ongoing annual fees and accountant costs