Sole trader vs company (Pty Ltd) for tradies

Sooner or later every busy tradie hears it, usually from a mate at the supplier: "You should be a Pty Ltd by now." Maybe. The choice between a sole trader and a company in Australia changes how you're taxed, what you can lose if a job goes wrong, how much paperwork you carry and even how your licence is held. This guide sets out what really differs, so you can have a sharper conversation with your accountant.

The short version

As a sole trader, you are the business. The profit is your income, the debts are your debts, and the paperwork is light. A company is a separate legal person that you own and run as a director. It pays its own tax, owns its own money, and carries more rules and more admin. Neither is "better". The right one depends on how much you earn, how much risk you carry and how much admin you're willing to take on.

Tax: sole trader vs company

A sole trader's business profit goes on their own tax return and is taxed at individual rates, with the tax-free threshold. There's no separate business return. business.gov.au sets out the tax differences between a sole trader and a company side by side.

A company has no tax-free threshold. It pays tax on every dollar of profit. For the 2025–26 year the ATO's company tax rates were 25% for a "base rate entity" (a company with aggregated turnover under $50 million and no more than 80% of its income from passive sources such as interest and rent) and 30% for everyone else. Check the rate for the current year with the ATO, and ask your accountant whether your company would meet the test.

That lower rate is the main reason people move to a company. But the money is the company's, not yours. When it reaches you, as wages, director's fees or dividends, you have to show it on your own tax return. So the saving only comes from profit you leave in the company. If you need every dollar to live on, the difference can be small, and the extra costs may cancel it out.

Liability: what you can lose

This is the other big difference, and for many tradies it matters more than tax. According to business.gov.au, a sole trader is personally liable for the business's debts. There's no line between business and personal assets, so your share of the house and the car can be used to pay them.

A company is generally liable for its own debts. That protection has limits, though:

• Directors are personally liable for the company's unpaid PAYG withholding and super, even after they stop being a director.
• Directors have legal duties, including acting in good faith and not letting the company trade while it's insolvent. Breaking them can put your own assets at risk.
• A company structure doesn't replace insurance. You still need the right cover for the work you do.

Licensing and insurance change too

Tradies often forget this part. Your trade licence is yours personally. In NSW and Queensland, for example, a company that contracts for licensed work needs a licence of its own.

• NSW: a company must hold a contractor licence before it contracts or advertises for residential building work over $5,000 (including GST), and for all electrical wiring, plumbing, drainage, gasfitting, air conditioning and refrigeration work. It must name a qualified supervisor, who can be you as a director.
• Queensland: the QBCC says a company must hold a company licence in its own right, with a nominee who holds a contractor or nominee supervisor licence in the same class.
• Other states and territories: check with your licensing regulator before you trade as a company. Our guide to checking a tradie's licence lists where to look.

Insurance shifts too. A sole trader isn't covered by workers compensation for their own injuries, so business.gov.au suggests looking at personal injury, illness and income cover. Once a company pays you a wage, you may become its worker. In Victoria, for example, WorkSafe says that if your company employs you, you are a worker of your own company and it needs to register. The company also has to pay super guarantee on a director's wages: the ATO lists company directors as eligible employees, at 12% and, from 1 July 2026, with each payday.

Costs and admin

A sole trader needs an ABN (free) and, if you trade under a name other than your own, a registered business name. A company costs more to set up and to keep. According to business.gov.au, you'll be dealing with:

• a company registration fee and an annual review fee, both paid to ASIC (check ASIC for the current amounts)
• a director ID for each director, which you must get before you're appointed
• a separate company bank account, which is compulsory
• a company tax return every year, on top of your own
• financial records kept for at least 7 years under the Corporations Act, and records of company decisions
• more paperwork in general, which usually means more of your accountant's time

Vehicles work differently too. A sole trader can use the cents per kilometre or logbook method for a car. The ATO says a company can only claim the actual costs of running a vehicle, and fringe benefits tax may apply if a company vehicle is available for private use. More on that in our guide to tradie tax deductions.

When to think about switching

There's no turnover figure where a company becomes the right answer. These are the questions that usually start the conversation:

• Is your profit well above what you need to live on? The company tax rate only helps on money you can leave in the business.
• Are the jobs getting bigger? Larger contracts, more subcontractors and more at stake make the liability question more important.
• Are you taking on staff? You'll have payroll, super and workers compensation either way, but the risks grow.
• Can you handle the admin? If the bookwork is already a struggle, a company adds to it.

Going from sole trader to company is the easy direction. Going back is harder, because a company has to be formally deregistered to stop existing. So it pays to get advice first. A company is also a separate legal person, so you'll need new registrations, a licence and insurance in its name, and new paperwork for customers and suppliers.

Whatever the structure, the basics don't change

Customers still need clear quotes, and you still need to know what you're owed and what you've spent. If you're a sole trader working out what you owe each year, read do sole traders pay super, workers comp, BAS and GST. If you're about to cross the GST line, see when a tradie has to register for GST.

BizzMate works the same for a sole trader or a company: your business name and ABN go on every quote and invoice, GST sits on its own line, and an invoice is locked once it has been sent. Your reports download as CSV or a spreadsheet, ready for whoever does your books. Start a free trial to try it on your own jobs.

This guide is general information, not legal or financial advice. Your business structure affects tax, liability and licensing, so talk to a registered tax agent or accountant, and to your state's licensing regulator, before you change it.