Sole Trader vs Company: Which Structure Suits a Tradie?
Updated 8 July 2026
Most Australian tradies start — and many rightly stay — sole traders: it’s free to set up, the paperwork is light, and you’re taxed at personal rates with the $18,200 tax-free threshold. A company brings a flat 25% rate on retained profit and limited liability, but costs more to run every year and doesn’t stop you being personally liable for your own bad work. The structure question is really a numbers-and-risk question.
The tax picture, honestly
Sole traders pay personal income tax on business profit. Current resident rates (2024–25 onward): nothing to $18,200, then 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above — plus the 2% Medicare levy. A base-rate company pays a flat 25% from the first dollar of profit.
The catch tradies are rarely told: the 25% only applies to money that stays in the company. Pay yourself wages or dividends — which owner-operators must, to live — and that money is taxed at your personal marginal rates anyway. The company advantage is real mainly when the business consistently earns more than you draw out, so profit can be retained and reinvested at 25%.
Also in the mix: sole traders get the 50% CGT discount on business assets held over 12 months; companies don’t. And if your income is mostly payment for your personal labour, the personal services income (PSI) rules can attribute company income straight back to you personally, cancelling the structure’s tax benefits. A one-person subbie billing labour is squarely who PSI was written for.
Liability: what a company does and doesn't protect
- It protects your personal assets from business debts — supplier accounts, leases, a job that goes bad financially — subject to any personal guarantees you sign (and suppliers and banks usually ask for them).
- It does not protect you from your own negligence. If your work injures someone or burns a house down, you can be personally liable regardless of structure. Insurance — public liability above all — is the real protection for both structures.
- Directors also carry personal duties, and can be personally liable for unpaid super and PAYG withholding under director penalty rules.
Cost and admin, side by side
| Sole trader | Company | |
|---|---|---|
| Set-up | Free ABN; business name ~$45/yr if trading under one | ~$600 ASIC registration + advice costs |
| Ongoing fees | None | ASIC annual review fee (a bit over $300) + higher accounting fees |
| Tax return | Your personal return, business schedule included | Separate company return + your personal return |
| Tax on profit | Personal marginal rates (0–45% + Medicare) | 25% retained; marginal rates when paid out |
| Super | Voluntary (and worth doing) | Compulsory super on wages you pay yourself |
| BAS if GST-registered | Yes | Yes |
A rule of thumb (and its limits)
As a rough screen: if you’re an owner-operator drawing out everything the business makes, staying a sole trader is usually simpler and no more expensive in tax. A company starts being worth modelling when profits are consistently well above what you need to live on, you’re taking on employees or bigger contract risk, or a builder/head contractor requires it. That’s a conversation to have with an accountant using your actual figures — the crossover depends on how much profit you can genuinely retain.
Whichever you pick, the bookkeeping is the same job
Invoices with GST, expenses with receipts, vehicle kilometres, quarterly BAS if registered, and a clean year-end summary. TradieMate handles that job for sole-operator tradies from the phone — see the tour or how it compares to other sole trader apps, and keep your records tidy enough that switching structure later is a decision, not an archaeology dig. What you can claim doesn’t change much either way — see tradie tax deductions.
Frequently asked questions
Does a company always pay less tax than a sole trader?
No. The 25% company rate only helps on profit left inside the company. Money you pay yourself is taxed at your personal marginal rate anyway (with franking credits doing the adjustment). For most owner-operator tradies who spend what they earn, the company rate saves little or nothing.
What does it cost to run a company?
Roughly $600 to register with ASIC, an annual ASIC review fee of a bit over $300, plus meaningfully higher accounting fees each year for the company tax return and compliance — commonly $1,500–$3,000+ against a few hundred for a sole trader return. Check current ASIC fees before deciding.
Can I change from sole trader to company later?
Yes, and that’s the normal path — start as a sole trader, incorporate when the numbers or the risk justify it. There are rollover provisions that can defer tax on moving business assets into the company. Get an accountant to run your actual numbers first.
Do I still lodge a BAS either way?
Yes — BAS follows GST registration, not structure. A GST-registered sole trader and a GST-registered company both lodge. See our BAS for sole traders guide for how it works.
This guide is general information, not tax, legal or financial advice. Rules and rates change — check current details with the ATO or a registered tax agent before acting on it.