Business Structure FAQs for Australian Small Businesses
Choosing the right business structure affects your tax position, asset protection, and ability to grow. There is no one-size-fits-all answer, as the best structure depends on your income level, risk profile, and long-term goals. Here are the questions we are asked most often about business structures.
What is the best business structure for a tradie in Australia?
For most tradies starting out, a sole trader structure is the simplest and cheapest option. However, once your taxable income consistently exceeds $100,000 to $120,000, operating through a company or trust often becomes more tax-effective. A company provides asset protection by separating your personal assets from business liabilities, which is important in trades with higher risk of claims. A trust adds income distribution flexibility if you have a spouse or family members on lower tax rates. Many tradies in South West Sydney start as sole traders and restructure as their business grows. At BVM, we help tradies choose the right structure for their stage of growth.
Should I operate as a sole trader or a company?
A sole trader structure is simpler, cheaper to set up, and has fewer compliance requirements. You report business income on your personal tax return and pay tax at individual rates. A company is a separate legal entity that provides limited liability protection and pays tax at 25% (for base rate entities). The trade-off is higher setup costs, annual ASIC fees, and more complex reporting obligations including separate tax returns and potential Division 7A issues. Generally, a company becomes worthwhile when your income is high enough that the flat 25% rate is lower than your marginal rate, and you need asset protection. Our team at BVM models both scenarios for clients to identify the tipping point.
What are the advantages of a discretionary family trust?
A discretionary family trust offers several advantages for business owners. First, income distribution flexibility allows you to allocate profits to beneficiaries on lower marginal tax rates each year. Second, assets held in a trust are generally protected from personal creditors and legal claims against individual beneficiaries. Third, trusts can access the 50% CGT discount on assets held for more than 12 months. Fourth, a trust provides succession planning benefits as control can pass between generations without triggering a disposal event. The main disadvantages are setup costs, annual compliance requirements, and the inability to carry forward losses to offset against future trust income. At BVM, we help families across Sydney determine if a trust suits their circumstances.
How much does it cost to set up a company in Australia?
The ASIC registration fee for a proprietary limited company is $576 for 2025-26. On top of this, you will need to pay for professional assistance with the company constitution, shareholder agreements, and initial setup of registers and minutes. Most accountants charge between $1,500 and $3,000 for a full company setup including ABN and TFN registration, GST registration, and PAYG withholding registration. You will also pay an annual ASIC review fee of $310. If you are setting up a company as trustee for a trust, you will need to factor in the cost of the trust deed as well, typically $1,000 to $2,000. Our team at BVM in Oran Park provides fixed-fee company setup packages so you know the cost upfront.
Can I change my business structure without triggering capital gains tax?
In most cases, changing your business structure involves a disposal of assets, which can trigger capital gains tax (CGT). However, there are rollover relief provisions that may apply. Small business restructure rollover (Subdivision 328-G) allows eligible small businesses to transfer active assets between related entities without immediate CGT consequences. To qualify, you must have aggregated turnover under $10 million, the assets must be active business assets, and the transfer must be part of a genuine restructure. The rollover defers the gain rather than eliminating it permanently. At BVM, we help business owners across Sydney navigate these provisions to restructure with minimal tax impact.
What is a corporate trustee and do I need one?
A corporate trustee is a company that acts as the trustee of a trust, rather than an individual person. Using a corporate trustee provides limited liability protection, meaning the trustee's personal assets are shielded from claims against the trust. It also provides continuity, as a company does not die or become incapacitated. If an individual trustee passes away, the trust assets can become entangled in their estate. A corporate trustee costs more to establish and maintain due to ASIC fees, but for trusts holding significant assets or operating a business, the protection is worthwhile. Our CPA qualified team at BVM recommends corporate trustees for most business and investment trusts.
How do I add a business partner to my existing structure?
Adding a partner depends on your current structure. If you are a sole trader, you would typically form a new partnership or company and transfer the business assets. If you operate through a company, you can issue new shares to the incoming partner, though this may have CGT and stamp duty implications. If you use a trust, the new partner can be added as a beneficiary or a new unit trust can be established. In all cases, you need a formal agreement covering profit sharing, decision-making, exit provisions, and dispute resolution. Proper documentation protects both parties. At BVM, we help business owners in South West Sydney structure partnership arrangements correctly from the start.
What is the difference between a unit trust and a discretionary trust?
A unit trust has fixed entitlements based on the number of units each holder owns, similar to shares in a company. Income and capital are distributed in proportion to unit holdings. A discretionary trust gives the trustee flexibility to decide how much income and capital each beneficiary receives each year. Unit trusts are commonly used for joint ventures or investment properties where parties want defined ownership percentages. Discretionary trusts are preferred for family businesses because of their income distribution flexibility and asset protection benefits. The choice depends on whether you need fixed entitlements or flexible distributions. Our team at BVM helps clients across Sydney choose the right trust structure for their goals.
Need Help With This?
If you have questions specific to your situation, our team can provide tailored advice. We work with over 100 small businesses across Sydney and hold a 5.0 Google rating.
This information is general in nature. It does not constitute professional advice tailored to your specific circumstances. Tax laws change frequently and individual situations vary. We recommend consulting with a qualified accountant before making financial decisions based on this information. BVM Accountants & Business Consultants, Oran Park NSW 2570.