The Business Structure Comparison Calculator runs the same Australian business profit through four structures — sole trader, company, partnership, and discretionary trust — and shows the estimated tax, net, and effective tax rate for each, so you can see what the structure itself costs or saves before paying a lawyer to discuss it. It uses the current Australian resident individual rates plus the 2% Medicare levy for the personal structures, and a flat 25% base-rate-entity tax for the company.
How Each Structure Is Taxed in the Calculator
Sole trader: all profit is taxed as your personal income, stacked on top of any other income you enter. The calculator isolates the business's share of tax by computing your tax with and without the profit and taking the difference — the honest way, because the profit fills whatever brackets sit above your salary.
Company: a flat 25% on profit, assuming the profit stays retained in the company. Money taken out later as dividends or salary is taxed again personally (with franking credits), which the calculator flags rather than models.
Partnership and trust: the profit is split 50/50 between two people — partners in one case, two trust beneficiaries in the other — each taxed at their own personal rates on top of their other income. In the calculator the two produce identical tax when the split is the same; the real-world difference is flexibility (a trust can vary the split each year) and cost, not this arithmetic.
Worked Example 1: $150,000 Profit, No Other Income
| Structure | Tax | Net | Effective rate | |---|---|---|---| | Partnership / trust (50/50) | 120,424** | 19.7% | | Company (retained) | 112,500 | 25.0% | | Sole trader | 110,162 | 26.6% |
Splitting wins because two people each use a tax-free threshold and the low brackets: each half (14,788 of tax including Medicare, against 39,838 decomposes as 18,200, 16% to 135,000, 37% above — plus $3,000 Medicare.
Worked Example 2: 60,000 Salary
Now the profit stacks on existing income. Sole trader incremental tax = tax on 60,000 = 9,988 = 54,050 (a 32.4% effective rate on the profit). The company still takes a flat 60,000** retained. The same business, a different answer — because other income decides which brackets your profit lands in. This is why the calculator asks for it.
Running Costs and the Limits of the Comparison
Tax is only half the ledger. Indicative annual running costs shown with the results: sole trader effectively 500 to 1,500 to 3,200 for ASIC fees and compliance. The winner is ranked on net before those costs, so a structure that wins by less than its extra running cost does not really win. Liability is the other half, and it is not in the numbers at all: a sole trader and partners carry unlimited personal liability, while a company (and a trust with a corporate trustee) quarantines it. Many businesses choose the company row for that reason alone, accepting the tax position the table shows.
Limitations
The model uses one rate scale (Australian residents, including the 2% Medicare levy) and fixed assumptions: company profit fully retained at the 25% base rate (30% applies to larger or passive-income companies), partnership and trust splits fixed at 50/50, no superannuation, deductions, offsets, or losses. Trust tax equals partnership tax here by construction; a real trust's advantage is distribution flexibility, which a single-year snapshot cannot price. Treat the output as the quantitative opening for an accountant conversation, not the decision itself.
Frequently Asked Questions
At what profit does a company beat a sole trader?
On tax alone, the crossover in these rate settings arrives once your profit would push well into the 37% bracket — roughly the mid-$100,000s with no other income, and much sooner when a salary already fills your lower brackets, as Example 2 shows. Splitting structures, when genuinely available, beat both at most levels.
Why do partnership and trust show the same tax?
Because in this model both split the profit 50/50 to two people with the same other incomes, and the personal tax on each half is identical. The structures diverge in law and flexibility — a trust can stream different amounts to different beneficiaries each year — not in a fixed-split calculation.
Does the company figure include getting the money out?
No. The company result assumes profit is retained and taxed once at 25%. Extracting it as dividends brings personal tax with franking credits for the company tax already paid; extracting it as salary makes it personal income. The retained figure is the right comparison for profits reinvested in the business, and an optimistic one for profits you plan to spend.