Choosing Your Startup Structure: Sole Trader vs Company vs Trust in Australia

Your business structure is one of the most consequential decisions you will make as a founder — and yet it is often made hastily, based on cost alone. The structure you choose on day one determines your personal liability exposure, the tax rate your business pays, your ability to bring on co-founders and investors, and the amount of administration you will shoulder every year.

Change your structure later and you face real costs: legal fees to dissolve and re-register, potential tax events (including capital gains tax on asset transfers), and the disruption of re-papering all your commercial contracts and IP assignments. Getting it right upfront is almost always cheaper than fixing it later.

Australia has four primary business structures available to founders: sole trader, partnership, company (Pty Ltd), and trust. Each carries a different risk profile, tax treatment, and level of investor-readiness. This guide walks you through all four so you can make an informed, confident choice. ASIC provides an authoritative overview of each structure type, updated June 2025.

When comparing business structures, four dimensions matter most for a startup founder:

• Liability: Are your personal assets — your home, savings, and car — at risk if the business fails or is sued?
• Tax: At what rate is profit taxed, and who pays it — the business or you personally?
• Cost and administration: What does it cost to set up and maintain each year, and how much compliance work is involved?
• Investor-readiness: Can you issue equity, bring on investors, and structure vesting schedules?

A freelance consultant testing a solo idea has very different needs to a two-founder SaaS startup that plans to raise a seed round in 18 months. Understanding where you sit on these dimensions will make the right structure obvious.

A sole trader is the simplest structure: there is no separate legal entity — you and your business are the same person in the eyes of the law. You use your personal Tax File Number (TFN) and all business income is taxed at your individual marginal tax rate, which can reach 47% (including the 2% Medicare levy) for income above $180,000.

The critical risk is unlimited personal liability: your home, savings, and all personal assets are exposed to business debts and legal claims. There is no corporate shield.

Setup is minimal. An ABN (Australian Business Number) is free to obtain. If you trade under a name other than your own, you'll need to register a business name: $45 per year or $104 for three years. business.gov.au covers sole trader obligations in full.

Best suited to: Freelancers, consultants, and solo founders in early validation mode — ideally before there is meaningful liability risk or any plan to raise investment. Once you hire staff, take on contracts with significant liability exposure, or start conversations with investors, it is time to incorporate a Pty Ltd company.

A partnership is formed when two or more people carry on a business together with a view to profit. The partnership has its own ABN and TFN and lodges its own tax return — but it does not pay tax at the partnership level. Instead, each partner's share of income or loss flows through to their individual tax return and is taxed at their personal marginal rate. business.gov.au outlines the full partnership structure.

The most significant risk for founders: in a general partnership, every partner has unlimited personal liability — including for debts incurred by the other partners in the course of business. If your co-founder makes a bad deal, you are personally on the hook. A written partnership agreement is strongly recommended but does not change this underlying liability exposure.

Limited partnerships allow passive (limited) partners to cap their liability at their contributed capital, but the general partner remains fully exposed. A specialised form — the Incorporated Limited Partnership (ILP) — is used for venture capital funds, not by startup founders themselves.

Bottom line for startup founders: Partnerships are rarely the right structure for a funded tech startup. The unlimited liability exposure and inability to issue equity make a Pty Ltd company far superior for most co-founder situations.

A proprietary company limited by shares (Pty Ltd) is a separate legal entity — it can own property, enter contracts, incur debt, and sue and be sued in its own name, independently of its shareholders or directors. ASIC notes that over 95% of Australian companies are proprietary limited companies.

Liability protection: Shareholders are generally liable only up to the amount unpaid on their shares. If a shareholder subscribed for shares at $1 each and has fully paid, their personal exposure is $nil. Important exceptions exist: directors can be personally liable for trading while insolvent, failing to meet PAYG withholding obligations, and breaching their duties under the Corporations Act 2001. Banks will also typically require personal guarantees from directors for loan facilities, which removes the liability protection in that context.

Tax rate: A Pty Ltd company pays a flat rate of 25% (if it qualifies as a base rate entity — see Section 3) or 30%, rather than your personal marginal rate. This can create a significant tax deferral advantage when profits are reinvested in the business.

Setup cost: ASIC company registration is $611 (from 1 July 2025), plus an annual review fee of $329/yr. Grow SMSF confirms these ASIC fee figures effective 1 July 2025.

Membership limits: A Pty Ltd is capped at 50 non-employee shareholders and cannot offer shares to the public. Founders planning to raise from large numbers of investors must eventually convert to a public company (Ltd) before an IPO.

A trust is a legal arrangement in which a trustee holds and manages assets on behalf of beneficiaries. Unlike a company, a trust is not a separate legal entity in the same sense — the trustee (who may be an individual or a Pty Ltd company) is legally responsible for the trust's obligations.

Two types are relevant to founders:

• Discretionary (Family) Trust: The trustee has discretion each year to distribute income and capital among beneficiaries (e.g., family members). This enables income splitting to lower-marginal-rate beneficiaries — a significant tax planning tool for established family businesses. If no distribution is made, the trustee pays tax at the top marginal rate of 47%.
• Unit Trust: Beneficiaries hold fixed units (similar to shares). Slightly more investor-friendly than a discretionary trust but still uncommon for VC-backed startups.

Setup cost: High. A trust deed prepared by a solicitor typically costs $1,500–$3,000+ and the ongoing administration — annual distribution resolutions, a separate trust tax return, deed compliance — is burdensome. business.gov.au covers trust obligations. The ATO provides guidance on family trust elections and distribution tax.

Startup suitability: Generally poor as a primary operating entity for a VC-backed startup — investors cannot easily obtain equity in a trust structure, and the lack of share mechanics makes SAFE notes and convertible instruments unworkable. Trusts are sometimes used as a holding entity above an operating Pty Ltd, primarily for tax planning purposes in family business contexts.

Australia has two company tax rates for the 2025–26 financial year, as confirmed by the ATO:

• 25% — for base rate entities: companies with aggregated turnover of less than $50 million in the income year, where no more than 80% of assessable income is "base rate entity passive income" (BREPI).
• 30% — for all other companies that do not meet the base rate entity criteria.

The 25% rate has applied from the 2021–22 income year and the thresholds remain unchanged for 2025–26. Eligibility is assessed each income year independently — prior-year status is irrelevant. A startup that grows past $50M in one year will pay 30% for that year, even if it was paying 25% the year before.

The passive income test requires that no more than 80% of the company's assessable income consists of BREPI — which includes dividends and franking credits, royalties, rent, interest, capital gains, and trust/partnership amounts traceable to passive income. A startup primarily earning active business income (software subscriptions, consulting, product sales) will almost always satisfy this test easily. A company that is primarily a holding or investment entity will likely fail it.

Additionally, the business.gov.au income tax guide confirms the base rate entity eligibility requirements for Australian businesses.

Individual marginal tax rates in Australia reach 47% (including the 2% Medicare levy) for income above $180,000 — nearly double the base rate company rate of 25%. This divergence creates a powerful tax deferral advantage for founders who choose to reinvest profits in the business rather than distribute them immediately as dividends or salary.

Here is a simplified illustration: if a startup earns $200,000 in profit and the founder is already earning $150,000 in salary, distributing that profit as additional salary could attract tax at up to 47% — costing $94,000 in tax. Leaving the profit in the company and paying 25% costs $50,000 in company tax, preserving an extra $44,000 to reinvest in growth. The deferred tax will eventually be payable when dividends are distributed, but the timing advantage can be significant over multiple years.

Franking credits: When a company pays tax and then distributes dividends to shareholders, shareholders receive a franking credit (also called an imputation credit) for the company tax already paid. This prevents double taxation — the shareholder's tax bill is reduced by the franking credit, with any excess refundable if the shareholder's marginal rate is below the corporate rate. Founders should understand how franking credits interact with their personal tax position when planning distributions.

Registering a Pty Ltd company in Australia involves several separate registrations with different government bodies. The correct sequence is:

1. Obtain a Director ID for each proposed director (via ABRS online using myID) — this must be done before company registration. See Section 5 for details.
2. Register the company with ASIC (Form 201) — fee: $611 from 1 July 2025. This issues your ACN (Australian Company Number), a unique 9-digit identifier that must appear on all company documents. ASIC provides the company registration portal and full guidance (updated June 2025).
3. Apply for an ABN (Australian Business Number) — free, via business.gov.au or the Business Registration Service at register.business.gov.au. Usually instant if all information is correct; up to 20 business days if manual review is required. Your ABN is your primary identifier for dealings with other businesses and the ATO.
4. Apply for a TFN (Tax File Number) — free, via ATO Online Services. Can be done at the same time as company registration. Your company's TFN is used to lodge its tax return.
5. Register a business name (if trading under a name other than the company's registered name) — $45 (1 year) / $104 (3 years) via ASIC Connect. Requires an ABN first. business.gov.au covers business name registration requirements.
6. Register for GST — free, via ATO Online Services, by phone (13 28 66), or through a registered tax/BAS agent. Required once your GST turnover reaches $75,000/year (or earlier if you choose voluntary registration). Requires an ABN first.

You can complete multiple registrations simultaneously through the Business Registration Service at register.business.gov.au, which streamlines the process.

To register a Pty Ltd company with ASIC using Form 201, you must provide the following information upfront:

• Proposed company name (or you can use the ACN as the company name — useful if you haven't settled on a name yet)
• State or territory of registration (where the registered office is located)
• Registered office address and principal place of business address (these can be the same)
• Share structure: number and class of shares to be issued, and the name(s) of the initial shareholders
• Name, residential address, date and place of birth of each proposed director and shareholder
• Written consent from all proposed members (shareholders)
• Each director's Director ID number

Upon registration, ASIC issues the ACN, which must appear on all official company documents, letterheads, and invoices alongside the company name. The ASIC company registration page provides the full checklist and online portal.

Annual obligations after registration: All Pty Ltd companies must pay an ASIC annual review fee of $329/yr (from 1 July 2025), pass a solvency resolution annually, and keep company details current on the ASIC register. Late payment of the annual fee attracts additional late fees. Directors are responsible for ensuring these obligations are met. The ASIC company annual review page outlines these ongoing requirements.

A Director Identification Number (Director ID) is a unique, permanent 15-digit identification number issued to any individual who is, or intends to become, a director of a company registered under the Corporations Act 2001 (or an Aboriginal and Torres Strait Islander corporation under the CATSI Act). It is a lifetime number — you keep the same Director ID regardless of how many companies you direct throughout your career.

The Director ID regime was introduced to help prevent illegal phoenixing activity (where company directors strip assets from a company and leave behind debts) by creating a verifiable, permanent trail of a person's directorships. ABRS confirms who needs to apply and when (updated April 2025).

Key rules for startup founders:

• Every co-founder appointed as a company director must obtain a Director ID before being appointed — there are no exceptions for first-time directors or small companies.
• You cannot obtain a Director ID on behalf of someone else. Each individual must apply personally to verify their own identity.
• Failing to obtain a Director ID, applying for multiple IDs, or misrepresenting a Director ID are offences under the Corporations Act. ASIC is responsible for enforcement (updated June 2025).

The Director ID application process is straightforward and free — but you must complete it personally. Here's how:

1. Set up a myID account (formerly myGovID): Download the myID app and verify your identity to at least Standard identity strength. You'll need to provide two Australian identity documents (e.g., Australian passport + Medicare card, or driver's licence + Medicare card).
2. Log in to the ABRS online portal at abrs.gov.au. Use your myID to authenticate.
3. Complete the application: Once your myID is set up, the actual Director ID application takes approximately 5 minutes. You'll receive your Director ID immediately on completion.

If you cannot obtain a myID (for example, because you live outside Australia), the ABRS provides alternative application methods — including paper-based applications with certified identity documents — but these take longer. See the ABRS application guide for full details (updated April 2025).

Practical tip: Start the myID setup process at least a week before you plan to register your company, especially if any co-founder is overseas or doesn't have a Standard-strength myID. Missing a Director ID will block company registration.

If you plan to raise capital from angel investors, venture capitalists, or accelerators, a Pty Ltd company is not just preferred — it is effectively a prerequisite. Here is why investors insist on this structure, as confirmed by ASIC and business.gov.au:

1. Equity mechanics: A company can issue shares, create different share classes, and implement vesting schedules — the fundamental building blocks of startup equity. Sole trader, partnership, and trust structures cannot replicate this.
2. Limited liability: Investors' risk is capped at their share investment. This is non-negotiable for any institutional investor.
3. Perpetual succession: The company continues to exist regardless of changes in shareholders or directors — critical if one founder exits or dies.
4. Separate legal entity: The company holds IP, enters contracts, and banks in its own name. Investors' capital sits inside a legal entity, not a personal bank account.
5. SAFE notes and convertible instruments: Instruments like SAFEs (Simple Agreements for Future Equity), convertible notes, and standard term sheets are all structured around a company's share capital — they cannot function with other entity types.
6. Standard governance: A board of directors, a company constitution, and a share register provide the governance frameworks investors expect before committing capital.

Ordinary shares are the standard share class for Australian startup founders. They carry voting rights (typically one vote per share), rights to dividends (at the company's discretion), and rights to surplus assets on winding up after debts and any preference shares are satisfied. ASIC's company share rules page covers share class mechanics under the Corporations Act (updated June 2025).

Initial share issuance: Most Australian startups issue founder shares at a nominal value (e.g., $0.001 or $1 per share) at incorporation, reflecting the pre-revenue stage. A common approach is to issue 1,000,000 or 10,000,000 shares at the outset to allow for fine-grained splits among co-founders without creating fractional shares later.

Vesting schedules: Not legally mandated but strongly recommended for every co-founding team. A typical schedule is 4 years with a 1-year cliff — meaning no shares vest in the first year, 25% vest at the one-year anniversary, and the remainder vest monthly over the following three years. Vesting is usually documented in a Shareholders' Agreement rather than the company constitution. It protects the startup (and the remaining founders) if one co-founder leaves early.

Preference shares: Common in VC investment rounds, preference shares confer priority in dividends and on liquidation. While a Pty Ltd can create preference share classes, it is capped at 50 non-employee shareholders and cannot offer shares to the public. Founders planning to raise from the public must convert to a public company (Ltd) before doing so.

Note: Founders should engage a startup-specialist lawyer to draft their constitution and shareholders' agreement. These documents govern some of the most critical decisions in the life of a startup.

Exit is when smart structural planning from day one really pays off. The Australian tax system provides two layers of potential CGT relief for qualifying founders:

Layer 1 — The 50% CGT Discount: If you hold shares in your company personally for more than 12 months before selling, only 50% of the capital gain is included in your assessable income. Note: companies themselves are generally not eligible for the 50% CGT discount. This is a major advantage of holding founder shares personally rather than through a corporate holding entity. business.gov.au explains the CGT discount in the context of business structure choices.

Layer 2 — Small Business CGT Concessions: If your company qualifies as a small business entity (aggregated turnover under $2 million, or net CGT assets under $6 million) and the active asset test is met, four additional concessions may apply, as detailed by the ATO's small business CGT concessions guidance:

• 15-year exemption: Disregard the entire capital gain if the asset has been held for 15+ years and you are 55+ (or permanently incapacitated) and retiring.
• 50% active asset reduction: Reduce the capital gain by a further 50% (after the CGT discount if applicable) — effectively paying tax on just 25% of the original gain.
• Retirement exemption: Exempt up to a lifetime limit of $500,000 of capital gains. If under 55, the exempt amount must be contributed to superannuation.
• Rollover: Defer the capital gain for up to 2 years, allowing reinvestment in another business without immediate tax.

These concessions are applied in a specific order: 15-year exemption → CGT discount → 50% active asset reduction → rollover/retirement exemption. The ATO's CGT concessions eligibility overview provides a step-by-step eligibility guide. Founders should seek specialist tax advice well in advance of any exit transaction.

Use this checklist to move from decision to action. Work through each step in order — some registrations depend on completing earlier ones first.

• ☐ Choose your structure: Confirm whether you are starting as a sole trader (validating only) or incorporating a Pty Ltd company. If you have any co-founders, any staff, or any investor conversations on the horizon — incorporate.
• ☐ Agree on your co-founder split: Before you register a single share, have a frank conversation with your co-founders about equity, roles, commitment, and what happens if someone leaves. Document the agreed split.
• ☐ Each director: obtain a Director ID via the myID app + ABRS online portal at abrs.gov.au — free, takes ~5 minutes once myID is set up. Do this before company registration.
• ☐ Choose a company name and check it is available using the ASIC company name search tool at asic.gov.au.
• ☐ Register your Pty Ltd company with ASIC (Form 201 via ASIC online portal) — fee: $611. Have all directors' and shareholders' details ready. ASIC's registration guide walks you through every step.
• ☐ Apply for an ABN — free, via business.gov.au or the Business Registration Service.
• ☐ Apply for a company TFN — free, via ATO Online Services (can be done simultaneously with ABN).
• ☐ Register a business name (if trading under a name different from the registered company name) — $45/yr via ASIC Connect. Requires ABN first.
• ☐ Engage a startup lawyer to draft your company constitution and shareholders' agreement, including vesting schedules. Costs vary — budget at least $1,500–$3,000 for a founder-grade document set.
• ☐ Set up a separate company bank account — never mix personal and business funds. This is a legal requirement for directors and essential for clean accounting.
• ☐ Register for GST once your projected GST turnover approaches $75,000 — or consider voluntary registration earlier if you have significant pre-revenue expenses. Register via ATO Online Services.
• ☐ Choose accounting software (Xero, MYOB, or QuickBooks Online) and connect your bank feed from day one. Clean records from the start will save you thousands in accounting fees later.
• ☐ Diarise your ASIC annual review fee ($329/yr) — late payment attracts additional fees and can lead to deregistration.
• ☐ Plan for your future exit: Ensure each co-founder holds shares personally (not via a corporate trustee) to preserve access to the 50% CGT discount at exit.

Yes, technically — but it is more complex and costly than starting with the right structure from the beginning. When you transition from sole trader to a Pty Ltd company, you are effectively creating a new legal entity. This means:

• All contracts, leases, and supplier agreements need to be re-assigned or re-executed in the company's name.
• Intellectual property (code, trademarks, brand assets) must be formally assigned to the company — this requires a written assignment deed and may have stamp duty implications in some states.
• The transfer of assets from sole trader to company may trigger a capital gains tax event, depending on what assets are involved and their value at the time of transfer.
• Your ABN changes — you'll need to notify the ATO and update all your invoices and business accounts.

If you know you will want investment or have significant liability exposure, the cost of incorporating upfront (under $700 in ASIC fees) is almost always less than the cost of restructuring later.

No — you can register a Pty Ltd company directly through the ASIC online portal without a lawyer. Many founders use online company registration services that walk through the Form 201 process for a modest fee.

However, while you do not need a lawyer to register the company, you almost certainly need one to set up the legal documents that govern how the company operates: the shareholders' agreement (covering vesting, dispute resolution, founder departure, IP assignment, and anti-dilution provisions) and the company constitution. Relying on ASIC's default replaceable rules without a bespoke constitution has led to costly disputes for many Australian startups. Budget for legal fees as a necessary startup cost, not an optional one.

Yes. A Pty Ltd company can have as few as one director and one shareholder — and they can be the same person. This is common for solo founders who want the liability protection and tax advantages of a company without a co-founder.

Under the Corporations Act 2001, a proprietary company must have at least one director who ordinarily resides in Australia. If you are building a company with a co-founder based overseas, you may need an Australian-resident director to satisfy this requirement. ASIC sets out the full requirements for company directors.

These two numbers serve different purposes and come from different government bodies:

• ACN (Australian Company Number): A 9-digit number issued by ASIC when you register a company. It is specific to companies — sole traders, partnerships, and trusts do not have ACNs. The ACN must appear on all company documents alongside the company name.
• ABN (Australian Business Number): An 11-digit number issued by the Australian Business Register (ABR). Any business or enterprise can apply for an ABN — sole traders, partnerships, companies, and trusts. Your ABN is your primary identifier for dealings with other businesses and the ATO (invoicing, GST registration, BAS lodgement).

A registered company will have both. On your invoices and letterheads, you typically display both your ABN and your ACN. The ABN is more commonly recognised by businesses and customers; the ACN is specific to ASIC and corporate governance contexts.

This is one of the most important scenarios to plan for before it happens — ideally by documenting the answer clearly in your shareholders' agreement before the company is even operational.

Key questions your shareholders' agreement should address:

• Vesting: If a co-founder leaves before their shares are fully vested, what happens to unvested shares? Typically they are forfeited or bought back at cost — this is the whole point of vesting.
• Buy-back / transfer restrictions: Can the departing founder sell their shares to anyone? Most shareholders' agreements restrict this with a right of first refusal — the remaining founders have the right to buy the departing founder's shares at an agreed or formula price before any third party can.
• Drag-along and tag-along rights: If the majority want to sell the company, can they force the minority to sell (drag-along)? Can the minority force the majority to include them in any deal (tag-along)?
• Good leaver / bad leaver provisions: The price at which shares are bought back often differs depending on whether the founder left voluntarily in good standing ('good leaver') or was removed for cause ('bad leaver').

Without these provisions in place, a departing founder may retain shares indefinitely, creating a cap table mess that will concern any future investor. A startup-specialist lawyer can draft these provisions as part of a founders' shareholders' agreement.

The small business CGT concessions become relevant at exit — when you sell your shares. However, the eligibility conditions (including the active asset test and the turnover/net asset value thresholds) are assessed at the time of the CGT event, not at incorporation.

There are two things founders should do from day one that affect CGT eligibility at exit:

1. Hold shares personally, not through a company: The 50% CGT discount (for assets held more than 12 months) applies to individuals and trusts — not to companies. If a founder holds their startup shares through a Pty Ltd holding company, they lose access to this discount. Most founder shares should be held personally.
2. Start the clock on the 15-year exemption: The 15-year exemption requires the asset to have been held for at least 15 continuous years. Founders who incorporate and hold shares from day one will satisfy this condition earlier than those who restructure later.

See the ATO's CGT small business entity eligibility page for full conditions. Engage a tax specialist before any exit transaction — the concessions can be worth hundreds of thousands of dollars and the rules are detailed.

The ATO 2025-26 tax rates for Australian residents are:

These rates exclude the Medicare levy of 2%. The Low Income Tax Offset (LITO) provides a maximum reduction of $700 for taxable income up to $37,500, phasing out fully at $66,667 — meaning an individual effectively pays no income tax until income exceeds approximately $22,575 in 2025-26. Source: ATO — Low Income Tax Offset.

Forward outlook: from 1 July 2026 the 16% rate (on $18,201–$45,000) drops to 15%, then further to 14% from 1 July 2027. Source: PwC Tax Summaries — Australia.

Using 2025-26 rates, assuming a single individual with no dependants and a 25% base rate company (aggregated turnover < $50M):

Sole Trader

• Income tax: $4,288 + 30% × ($80,000 − $45,000) = $14,788
• Medicare levy: 2% × $80,000 = $1,600
• Total: ~$16,388 (effective rate ~20.5%)

Company (25% flat rate, profit retained)

• Company tax on full $80k: $20,000 (worst case, all retained)
• With director salary of $45,000: personal tax ~$5,700 + company tax 25% × $35,000 = $8,750 → Total: ~$14,450
• Retained profit defers further personal tax until dividends are paid (with franking credits)

Discretionary Trust (2 adult beneficiaries, $40k each)

• Each beneficiary: 16% × ($40,000 − $18,200) = $3,488 minus LITO ~$575 = $2,913; + Medicare $800 = $3,713
• Total family tax: ~$7,426 (effective ~9.3% on $80k)
• ⚠️ Requires genuine separate beneficiaries — ATO's Section 100A integrity rule applies to reimbursement arrangements. Source: Pitcher Partners — Discretionary Trusts.

At $200,000 taxable profit, the choice of structure becomes even more significant. All figures use 2025-26 rates per the ATO.

Sole Trader

• Income tax: $51,638 + 45% × ($200,000 − $190,000) = $56,138
• Medicare levy: $4,000; Medicare Levy Surcharge (if no private hospital cover, income $158,001+): +$2,000
• Total: ~$62,138 (effective rate ~31%)

Company (25%, director salary $90k)

• Personal tax on $90k salary: ~$18,800 + Medicare $1,800 = $20,600
• Company tax on remaining $110k: 25% = $27,500
• Total: ~$48,100 (effective ~24%) — saving of ~$14,000 vs sole trader

Discretionary Trust (3 adult beneficiaries)

• $70k each to Beneficiaries A & B: ~$15,688 each; $60k to Beneficiary C: ~$10,488
• Total family tax: ~$41,864 (effective ~21%)
• Key insight: at $200k the sole trader faces the 45% top marginal rate (above $190k), while a trust distributed across three beneficiaries can keep each below the 37% bracket. Source: SuperGuide — Income tax brackets.

Division 7A — Benchmark interest rate 2025-26: If a founder borrows money from their private company, Division 7A of the ITAA 1936 deems the loan a taxable unfranked dividend unless it is structured as a complying loan. For 2025-26, the benchmark interest rate is 8.37% (down from 8.77% in 2024-25). A complying loan requires a written agreement, minimum annual repayments of principal and interest, and a maximum term of 7 years (unsecured) or 25 years (secured by registered mortgage). Source: ATO — Division 7A loans.

The ATO also issued TD 2025/6 clarifying that s.109U catches interposed entity arrangements through trusts — expanding the scope of Division 7A beyond straightforward company-to-shareholder loans. Source: Gavin Ma & Co — TD 2025/6.

Small Business CGT Concessions (Division 152): To access the four CGT concessions when selling a business or shares, you must satisfy at least one of: (1) aggregated turnover < $2 million; or (2) net CGT assets ≤ $6 million. The 2025-26 lifetime CGT cap (for amounts contributed to super under the 15-year or retirement exemption) is $1,865,000. The retirement exemption allows up to $500,000 lifetime capital gain to be exempt (must go to super if under 55). Source: Clean Slate — Small Business CGT Concessions 2025-26.

Small Business Restructure Roll-over (Subdivision 328-G): Converting from sole trader to Pty Ltd normally triggers CGT on transferred assets. The roll-over eliminates this liability for businesses with aggregated turnover < $10 million, provided the transfer is part of a genuine restructure with no change in ultimate economic ownership. The asset is transferred at its cost base — no gain is triggered at the time of transfer. Available since 1 July 2016. Professional costs typically run $3,000–$10,000+; ASIC company registration costs $538 in 2025-26. Stamp duty on property transfers may still apply under state law. Source: ATO — Small Business Restructure Roll-over.

Director duties and insolvent trading: Once you incorporate, you become personally exposed to director liability rules. Under s.588G of the Corporations Act 2001, a director must prevent a company incurring debts when insolvent. Criminal liability for dishonest insolvent trading carries penalties of up to 2,000 penalty units ($550,000) and/or 5 years imprisonment. Civil penalty is up to $200,000. Source: SV Partners — Insolvent Trading Guide 2025.

Director Penalty Notices (DPNs): The ATO can issue a DPN making a director personally liable for the company's unpaid PAYG withholding, superannuation guarantee charge, and GST. A lock-down DPN — triggered when obligations are reported more than 3 months late or not reported at all — can only be remitted by paying the full debt. Resignation as director does not extinguish liability for obligations that accrued during your tenure. Source: ATO — Director Penalty Regime.

These hand-picked videos and podcast episodes go deeper on the topics in this guide. We've favoured Australian creators, advisers and founders, with a few standout global explainers where the concept is universal. Each link was checked to confirm it is live at the time of publishing; treat any figures, tax rates or thresholds mentioned in older clips as point-in-time and cross-check against the current rules above.

Watch

• Sole Trader vs Company EXPLAINED SIMPLY (Australia) — Davie Mach (2024). Sydney CA Davie Mach (Box Advisory Group, CA ANZ member) breaks down tax rates, liability, and when to switch from sole trader to company — exactly the decision early-stage AU founders face.
• Company vs Trust Structure EXPLAINED SIMPLY (Australia) — Davie Mach (2024). Deep comparison of company vs trust, including a 'hybrid structure' case study; covers asset protection, income splitting, and real scenarios for AU business owners.
• All Business Structures Explained in 10 Minutes — Ethan Rooshock (2024). Australian accountant-turned-YouTuber covers all four AU structures (sole trader, partnership, trust, company) with pros/cons and tax implications in a concise 10-minute format.
• Family Trust vs. Company: Best Business Structure Australia — Ethan Rooshock (2024). Focused head-to-head on family (discretionary) trust vs Pty Ltd company — asset protection, CGT discount, income distribution, and setup costs explained for AU founders.
• Choosing a business structure: sole trader, companies, trusts & ACNs v. ABNs [7/12] — Rask (2022). Episode 7 of the Australian Business Podcast by Owen Rask (Rask Group); includes three founder case studies with structure recommendations and covers ABN vs ACN, sole trader, partnership, company, and discretionary and unit trusts.

No standalone Australian podcast episode met our quality bar for this specific topic at publishing time, so this list is video-led. We'll add audio as strong episodes appear.