The Best Business Structure for Tradies in Australia

Why your business structure matters more than your ute:

Whether you're a sparky, chippy, plumber or tiler, choosing the right business structure for you affects how much tax you pay, how well your house is protected if a job goes wrong, and how much admin you deal with every year.

Most tradies start as a sole trader, and that's often the right call. But as income grows, staff come on and bigger contracts land, setting up a company can save thousands in tax and protect what you've built. Here's how sole trader and company compare, in plain English.

Sole trader: simple, cheap and personal

As a sole trader, you and the business are the same legal person. You trade under your own ABN, and business profit is added to your personal tax return.

Pros for tradies

• Cheapest and fastest to set up: just an ABN, plus GST registration once turnover hits $75,000.
• Least paperwork: one individual tax return, no separate company or trust return.
• You keep all the profit and can access cash freely.
• Losses in the early years can usually offset other income, such as wages from a part-time job (subject to the non-commercial loss rules).
• A small business income tax offset of up to $1,000 a year may apply.

Cons for tradies

• Unlimited liability. If a client sues or the business can't pay its debts, your house, car and savings are at risk.
• Personal tax rates climb fast. For 2026–27, income over $135,000 is taxed at 37%, and over $190,000 at 45%, plus 2% Medicare levy.
• No way to split income with a spouse or family members.

Best for: apprentices going out on their own, tradies starting a side business, and those earning under roughly $100,000–$120,000 profit with low risk.

Company (Pty Ltd): lower tax rate, better protection

A company is a separate legal entity registered with ASIC. You're usually the director and shareholder, and the company owns the business, signs contracts and pays its own tax.

Pros for tradies

• Flat 25% tax rate for small companies (base rate entities), compared with up to 47% personally.
• Limited liability. Business debts and claims generally stay with the company, not your personal assets.
• Looks more established to builders, commercial clients and lenders, and some head contractors prefer it.
• Easier to grow, bring in a business partner or sell the business later.
• Profits can be left in the company to fund tools, vehicles or a slow season at the 25% rate.

Cons for tradies

• Higher setup and running costs: ASIC registration, the annual ASIC review fee, a company tax return and more bookkeeping.
• The money isn't yours to grab. You must pay yourself through wages (with PAYG and super) or dividends. Taking cash out informally can trigger Division 7A loan rules.
• Director duties. You can be personally liable for unpaid PAYG withholding, GST and super under the director penalty regime.
• Banks and suppliers often ask for a personal guarantee, which weakens the asset protection.
• No access to the 50% CGT discount when the company sells assets.

Best for: tradies with steady profits above roughly $120,000, employees on the books, or higher-risk work like building, electrical and commercial contracting.

Sole trader vs company at a glance

Which structure suits your trade business?

There's no single "best" structure. It depends on your profit, risk, family and plans. A typical path looks like this:

1. Starting out (profit under about $100,000): sole trader. Keep costs low, build the client base and get good public liability insurance.
2. In between ($100,000–$120,000): usually stay a sole trader, but review it each year with your accountant so you can switch at the right time.
3. Growing (steady profit above $120,000, staff on board or higher-risk work): a company, for the 25% rate and limited liability.

Example: Jake the electrician, $150,000 profit (2026–27 rates)

With a company, Jake pays around $6,300 less tax this year and builds $10,800 of super. The catch: $36,900 of after-tax profit stays in the company. When it's paid out later as a franked dividend, Jake may pay top-up tax depending on his income that year. Extra running costs, such as ASIC fees and a company tax return, are typically $1,500–$3,000 a year.

Simplified figures for illustration only. They ignore offsets, super and other income.

Watch-outs every tradie should know

• Personal services income (PSI). If most of your income comes from one builder for your own labour, the PSI rules may apply. Then a company won't save tax, because the income is taxed as yours anyway. Passing the results test (paid for a result, own tools, fixing defects at your cost) usually avoids this.
• Licensing. In Queensland, the QBCC licence must match your structure. A company needs its own company licence and a nominee supervisor, so plan this before you switch.
• Insurance. No structure replaces public liability, income protection and tool insurance. Asset protection is a second layer, not the first.
• Changing structure later. Moving from sole trader to a company is common, but it can trigger capital gains tax, stamp duty and GST issues. Small business restructure rollover relief may help.
• Contracts, ABN and GST. A new structure means a new ABN, updated invoices, a new bank account and telling your clients and suppliers.

Business structure FAQs for tradies

Q. What is the best business structure for a tradie just starting out?

    Usually a sole trader. It's cheap, simple and lets early losses offset other income. Review it once profit grows.

Q. At what income should a tradie switch to a company?

    There's no fixed number, but many tradies consider it once profit is steadily above $120,000, or when they take on staff or higher-risk work.

Q. Does a company protect my house?
     It helps, but not completely. Personal guarantees, director penalties for unpaid tax and super, and negligence claims can still reach you personally.

Q. Can I pay my wife or partner through my business?

     As a sole trader, only a reasonable wage for real work they do. With a company, they can be paid a wage for real work or, if they're a shareholder, receive dividends.

Q. Can I go back to being a sole trader later?

     Yes, but closing a company takes time and fees, and moving assets out may trigger tax. It's best to choose with an eye on where your business is heading.

Get the right structure with C&S Accounting Solutions

The right structure can save thousands each year, and the wrong one can cost you just as much. Our Brisbane-based registered tax agents help tradies across Australia with:

• Structure reviews comparing sole trader and company for your numbers
• Setting up your company, including ASIC registration and compliance
• Moving from sole trader to company, with rollover relief where available
• Tax returns, BAS, bookkeeping and payroll for trade businesses
• PSI reviews and year-end tax planning

Not sure which structure is right for you? Book a structure review and we'll run the numbers for your trade business.

This article is general information only and does not consider your personal circumstances. Speak to a registered tax agent before acting.