Sole Trader vs Company Tax Comparison

Same business profit, taxed under two different structures — shows the tax outcome side by side to inform a structuring conversation.

FY 2025–26

FY 2026–27 (current)

Rates & assumptions used in this calculator

Sole trader: business profit is taxed as personal income at the resident individual marginal rates, plus the Medicare levy — same brackets as the Income Tax Estimate Calculator (15% second bracket for FY2026-27, 16% for FY2025-26).
Company: profit is taxed at a flat company rate — 25% if the company qualifies as a base rate entity (aggregated turnover under $50 million and no more than 80% passive income), otherwise 30%. This tool assumes base rate entity status by default, toggleable.
This tool compares the tax on retained profit only. If company profit is later paid out as a franked dividend, the shareholder pays their own marginal rate on the grossed-up dividend with a credit for the company tax already paid (franking credits) — the combined result often approaches the sole trader outcome, which this tool doesn't calculate.
Does not model superannuation contributions, trust structures, Div 7A loans, or the compliance cost difference between structures — all of which matter in a real structuring decision.

Based on ATO individual and company tax rate guidance as at July 2026. This is a starting comparison only — a structuring decision should always involve a registered tax agent considering the client's full circumstances.

Business profit

$120,000

Annual business profit (before tax)

Company qualifies as a base rate entity?

Aggregated turnover under $50m and no more than 80% passive income

Yes (25%)

No (30%)

Sole trader

tax + Medicare levy

Net profit after tax$0

Effective rate0%

Company

at 25% base rate entity rate

Net profit after tax$0

Effective rate0%

Should You Operate as Sole Trader or Company?

Compare tax positions, liability, and complexity across both structures. Our accountants analyze your specific situation and recommend the optimal business structure for maximum tax efficiency.

Tax comparison shown Liability analysis Recommendation

This is a general estimate only, not tax or structuring advice. It compares retained-profit tax only and doesn't model franking credits on dividends, superannuation, asset protection, compliance costs, or Div 7A implications — all of which are usually decisive in a real sole trader vs company decision. Refer to a registered tax agent before restructuring.