Quick answer
For a business owner whose partner has no other income, and a household that lives on $100,000 a year after tax, a company saves about $10,700 a year at $150,000 profit, $40,400 at $300,000 and $84,400 at $500,000, compared with staying a sole trader. That's on 2026–27 rates and after the extra accounting and ASIC fees.
A family trust with a bucket company saves slightly more under current law. However, a 30% minimum tax on discretionary trusts is proposed from 1 July 2028, so for most businesses setting up now we start with a company. Contractors and consultants should check the personal services income (PSI) rules first, because they can wipe out the saving.
Potential tax savings at a glance (2026–27)
| Net profit | Tax as a sole trader | Tax saving: Company | Extra accounting & ASIC fees | Net saving after fees: Company | Net saving after fees: Trust + bucket company* | Net saving: Company over 5 years |
|---|---|---|---|---|---|---|
| $150,000 | $38,600 | $11,900 | −$1,387 | $10,700 | $12,200 | $53,500 |
| $300,000 | $105,900 | $41,700 | −$1,387 | $40,400 | $42,000 | $202,000 |
| $500,000 | $199,900 | $85,700 | −$1,387 | $84,400 | $86,000 | $422,000 |
Annual figures, 2026–27 rates. Household of business owner plus spouse with no other income, living on $100,000 a year after tax, with the rest of the profit kept in the business. Net savings are after the extra yearly accounting and ASIC fees of each structure (and the tax deduction for those fees); see the compliance cost table below. 5-year figure assumes the same profit each year. *Trust figures are under current law; a 30% minimum tax on discretionary trusts is proposed from 1 July 2028.
Most articles about business structures list the pros and cons and stop there. This one puts dollar figures on the decision. I'm Colm Delaney, a Chartered Accountant and founder of Reacco Chartered Accountants, a Perth accounting firm in Warwick that advises small businesses, sole traders, companies and trusts across Western Australia on tax and business structure. Below are the 2026–27 tax figures for the same household at three profit levels, run through the three structures most small businesses choose between.
If you'd like the background on how each structure works first, covering control, liability and paperwork, read our sole trader vs company guide. This article is about the numbers.
Our assumptions
- Tax year: 2026–27 resident rates, including the new 15% bottom rate, the 2% Medicare levy, the low income tax offset and the small business income tax offset (16%, capped at $1,000).
- Household: a business owner plus a spouse or partner who has no other income and doesn't work in the business.
- Spending: the household needs $100,000 a year after tax to live on. Profit above that stays in the business.
- Company: owned 50/50 by the owner and partner, taxed at the 25% base rate entity rate, paying franked dividends.
- Trust: distributes equally to the owner and partner to fund living costs, with the balance going to a bucket company taxed at 25%.
- Compliance costs: the extra yearly accounting and ASIC fees for each structure are taken off in the net savings figures, using Reacco's published fees and the 2026–27 ASIC annual review fee.
- Not included: voluntary super contributions, so the structures are compared on the same basis. We cover super below.
This applies to almost any industry: cafes, online stores, trades, allied health, consultants, agencies. The tax maths is the same. What changes between industries is the PSI risk, which we explain below.
The rates that drive the decision
| Taxable income (individuals, 2026–27) | Tax rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 15% (down from 16% last year) |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and over | 45% |
| Plus Medicare levy | 2% (so the top rate is effectively 47%) |
| Company (base rate entity) | 25% flat, from the first dollar |
A sole trader's profit is personal income, taxed at up to 47% whether you spend it or not. A company pays 25% from the first dollar and lets you decide when profit reaches your personal tax return. A trust lets you decide who in the family it goes to. Those two levers, timing and splitting, are where all the savings in this article come from.
Sole trader vs company vs trust at $150,000 profit
| Structure | Total tax this year | Effective rate | Cash to your household | Kept in the business (after tax) | Saving vs sole trader |
|---|---|---|---|---|---|
| Sole trader | $38,600 | 25.7% | $111,400 | $0 | – |
| Company (you + partner as shareholders) | $26,700 | 17.8% | $100,300 | $23,000 | $11,900 |
| Family trust + bucket company | $24,400 | 16.3% | $100,100 | $25,500 | $14,200 |
A company saves around $11,900 a year, mainly by splitting dividends with your partner. After the extra accounting and ASIC fees you're still about $10,700 a year ahead. The saving is real but modest. At this level, liability protection and growth plans should weigh as much as the tax.
Sole trader vs company vs trust at $300,000 profit
| Structure | Total tax this year | Effective rate | Cash to your household | Kept in the business (after tax) | Saving vs sole trader |
|---|---|---|---|---|---|
| Sole trader | $105,900 | 35.3% | $194,100 | $0 | – |
| Company (you + partner as shareholders) | $64,200 | 21.4% | $100,300 | $135,500 | $41,700 |
| Family trust + bucket company | $61,900 | 20.6% | $100,100 | $138,000 | $44,000 |
This is where the gap opens up. A sole trader pays about $105,900. A company pays about $64,200, saving roughly $41,700 a year, and keeps $135,500 in the business after tax for stock, equipment, a cash buffer or investing.
Sole trader vs company vs trust at $500,000 profit
| Structure | Total tax this year | Effective rate | Cash to your household | Kept in the business (after tax) | Saving vs sole trader |
|---|---|---|---|---|---|
| Sole trader | $199,900 | 40.0% | $300,100 | $0 | – |
| Company (you + partner as shareholders) | $114,200 | 22.8% | $100,300 | $285,500 | $85,700 |
| Family trust + bucket company | $111,900 | 22.4% | $100,100 | $288,000 | $88,000 |
At $500,000 a sole trader pays about 40% of profit in tax. A company brings that down to about 22.8%, saving around $85,700 a year. A sole trader at this level is also carrying unlimited personal liability for a substantial business.
What if you take every dollar out?
If the household spends all of the profit each year, nothing stays in the company at 25%, so the saving comes from income splitting alone:
| Net profit | Sole trader | Company (all paid out as dividends) | Trust (split 50/50, no bucket company) |
|---|---|---|---|
| $150,000 | $38,600 | $29,000 (net saving after fees $8,400) | $27,000 (net saving after fees $11,100) |
| $300,000 | $105,900 | $79,100 (net saving after fees $25,700) | $77,100 (net saving after fees $28,300) |
| $500,000 | $199,900 | $166,700 (net saving after fees $32,300) | $164,700 (net saving after fees $34,800) |
The structure still pays for itself, but the biggest savings go to owners who can leave profit in the business to fund growth.
Retained profit isn't tax-free forever
Profit kept in a company has been taxed at 25%. When it's paid out later as a franked dividend, you pay only the difference between 25% and your personal rate at that time. Paid out in a lower-income year, such as a year off, a sale year or retirement, the extra tax can be small or nil.
What you can't do is treat company money as your own. Withdrawals that aren't a wage, a dividend or a documented loan fall under Division 7A and can be taxed as an unfranked dividend at your full rate. Loans need a complying loan agreement at the ATO benchmark rate, which is 8.77% for 2026–27.
The proposed 2028 trust minimum tax
The 2026–27 Federal Budget proposed a 30% minimum tax on discretionary trusts from 1 July 2028. Treasury released draft legislation in September 2026. It is not yet law. Under the draft:
- The trustee pays at least 30% on the trust's net income. Individual beneficiaries get a non-refundable credit, so splitting income to a low-income partner loses most of its value.
- Corporate (bucket company) beneficiaries get no credit, so income is effectively taxed twice.
- Trusts can elect to fix beneficiaries' entitlements in equal shares to avoid the minimum tax, but the split is then locked in and very hard to undo.
- CGT rollover relief is proposed for three years from 1 July 2027 to help restructure out of trusts.
Our view right now: for a new business structure, a company is the default starting point unless there's a clear reason for something else. If you already operate through a trust, you don't need to act today, but you do need a structure review well before 1 July 2028. See our 2026–27 Federal Budget breakdown for the other proposed changes.
Four things that can change the answer
1. Personal services income (PSI)
If most of your income comes from your own personal skills or effort, the PSI rules can tax it to you personally whatever structure you use. That covers IT contractors, consultants, engineers, labour-only contractors and many professionals. Then there's no splitting and no 25% rate. You're outside the rules if you're a personal services business, for example by passing the results test (paid for a result, supplying your own equipment, liable to fix defects), or, where less than 80% of income comes from one client, one of the other tests. Read more in our income splitting crackdown guide.
2. Your partner's real situation
The numbers above assume your partner has no other income. If they earn a salary, the splitting benefit shrinks. If they genuinely work in the business, a market-rate wage is another option in any structure. Dividends must go to real shareholders, and trust distributions must actually benefit the person receiving them, or the ATO's section 100A rules apply.
3. Super
Concessional super contributions are taxed at 15% (30% above $250,000 income), against personal rates up to 47%. The cap is $32,500 for 2026–27, with carry-forward of unused amounts if your balance is under $500,000. Use super alongside your structure in every scenario above.
4. Costs and the move itself
A company costs more to run each year. Here is the comparison using Reacco's published fees and the 2026–27 ASIC fee (all tax deductible, and already allowed for in the net savings above):
| Structure | What you pay for each year | Yearly cost (ex GST) | Extra vs sole trader |
|---|---|---|---|
| Sole trader | Sole trader tax return $850 | $850 | – |
| Company | Company tax return and financial statements $1,600; ASIC annual review fee $342; individual tax return $295 | $2,237 | +$1,387 |
| Trust + bucket company | Trust return $600; bucket company return $1,600; ASIC annual review fees for the bucket company and trustee company $342 each; individual tax return $295 | $3,179 | +$2,329 |
Setting up a company also costs $636 in ASIC registration fees in 2026–27, plus the set-up work. Transferring the business from your name to a company can raise CGT and stamp duty questions. Rollovers and the small business CGT concessions often mean little or no tax on the move, but it depends on who will own the shares, so plan it before you set anything up. Directors also take on personal liability for unpaid PAYG withholding, GST and super through director penalty notices.
When should you switch from sole trader to a company?
| Net profit | What we'd usually recommend looking at |
|---|---|
| Under about $120,000 | If your partner has no income, a company can still save around $7,000 a year after fees, mostly from income splitting. If your partner earns a salary, the saving is small and sole trader is usually fine. |
| $120,000 to $200,000 | Model a company, especially if you're growing, hiring or taking on risk. |
| $200,000 and over | A company almost always wins. At $200,000 profit staying a sole trader costs about $18,400 a year, and about $40,400 at $300,000. |
| Already in a trust | Book a structure review before the proposed 1 July 2028 start date. |
Every household is different: partner's income, adult children, how much you need to live on, existing assets. We model your actual numbers before recommending any change.
Why Perth business owners use Reacco for structure advice
Reacco Chartered Accountants is a Perth accounting practice in Warwick working with small businesses across Western Australia. Before recommending any change of structure, we model your real profit, family situation and plans through each option and show you the saving in dollars.
- Chartered Accountant (CA ANZ member) and registered tax agent (TPB 26342980), plus ASIC registered agent for company set-ups;
- Xero-based, with fixed fees: monthly packages from $400 + GST, sole trader returns from $850 + GST and company returns from $1,600 + GST;
- working with businesses across Perth, including Joondalup, Wanneroo, Stirling, Osborne Park, Balcatta, Scarborough, Midland, Fremantle, Rockingham and Armadale, plus regional WA;
- a dedicated construction and trades practice, Reacco Construction & Trades, for builders and tradies.
See our small business accountant Perth page and pricing.
Frequently asked questions
Who can help me choose a business structure in Perth?
A Chartered Accountant who is a registered tax agent can model sole trader, company and trust options using your real numbers. Reacco Chartered Accountants in Warwick, Perth, provides fixed-fee structure advice, tax returns, BAS and bookkeeping for small businesses across Western Australia.
At what profit is a company better than a sole trader?
For an owner whose partner has no other income, a company usually starts saving meaningful tax at around $120,000 to $150,000 of net profit. On 2026-27 rates, after the extra accounting and ASIC fees, the saving is about $10,700 a year at $150,000 profit, $40,400 at $300,000 and $84,400 at $500,000, assuming the household lives on $100,000 after tax and the rest stays in the company.
Is a family trust still worth setting up in 2026?
Under current law a trust with a bucket company can save slightly more than a company. But a 30% minimum tax on discretionary trusts is proposed from 1 July 2028, which would largely remove the benefit of splitting income to low-income family members and of bucket companies. For most new structures, a company is now the safer starting point.
What is the company tax rate for small businesses in 2026-27?
Companies that are base rate entities (aggregated turnover under $50 million and no more than 80% passive income) pay 25%. Other companies pay 30%.
What are the individual tax rates for 2026-27?
Nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000, plus the 2% Medicare levy.
Do the PSI rules stop me using a company?
You can still use a company, but if your income is personal services income and you are not a personal services business, the income is taxed to you personally and the tax savings disappear. Consultants and contractors who work mainly for one client are most at risk.
Can I just take money out of my company when I need it?
No. Money must come out as a wage, a dividend or a documented loan. Otherwise Division 7A can treat it as an unfranked dividend taxed at your full marginal rate. Loans need a complying agreement at the ATO benchmark rate, which is 8.77% for 2026-27.
How much does it cost to run a company?
Based on Reacco's published fees, a company costs about $1,400 a year more than a sole trader (ex GST): a company tax return and financial statements, the $342 ASIC annual review fee, and an individual tax return. The fees are tax deductible. Reacco's company tax returns start from $1,600 + GST, and fixed monthly packages start from $400 + GST per month.
About the author
Colm Delaney, CA is a Chartered Accountant (CA ANZ) and the founder of Reacco Chartered Accountants in Perth, Western Australia. He works with small business owners, sole traders, companies and trusts on tax planning, compliance, Xero and business advisory. His focus is helping WA business owners keep more of what they earn.
General information only: this article is not personal financial or tax advice. Figures use 2026–27 rates and the stated assumptions, are rounded to the nearest $100 and are correct as at 5 October 2026. The trust minimum tax is a proposal and not yet law. Speak to a registered tax agent about your own circumstances.