Sole Trader vs Company Tax Calculator — Australia 2025-26

When Does a Company Structure Start to Pay Off?

As a sole trader, all business profit is taxed at your personal marginal rates — up to 47% including the Medicare levy in FY 2025-26. A base-rate-entity company pays a flat 25% on the same profit, but the saving is only real if you can leave money in the business rather than paying it all out as salary or dividends.

The usual tipping point sits around $120,000–$150,000 of sustained annual profit. Below that, company setup fees, ASIC charges, workers compensation, separate tax returns and bookkeeping overhead often eat the tax difference. Above it, the flat rate plus asset protection and easier profit retention usually win.

Remember the personal services income (PSI) rules: if the income is mainly a reward for your personal effort or skill, the ATO can attribute it back to you personally and remove most of the company advantage. Contractors in IT, consulting and trades are the most common cases caught. Passing the results test, or earning each contract from unrelated clients with your own premises and equipment, is what keeps genuine businesses outside the attribution net.

There is no single right answer — the structure decision also affects CGT discounts, losses, super contributions and payroll tax registration, so treat the result as a starting point for a conversation with your accountant. Timing matters as well: restructuring mid-year triggers extra returns, and rolling an existing business into a company can itself have CGT consequences unless a rollover concession applies.