Sole Trader vs Company in Australia: The Honest 2026 Comparison
Should you register as a sole trader or a Pty Ltd company in Australia? Real numbers, real trade-offs, and a decision tree for solo founders.
The 60-second answer
- Making under AU$75k/year and no employees → Sole trader.
- Making over AU$75k or planning to hire → Consider Pty Ltd.
- Raising capital or bringing on a co-founder → Pty Ltd, always.
Real costs in 2026
Sole trader
- Setup: Free (just an ABN)
- Ongoing: AU$0 registration
- Accounting: AU$500–1,500/yr for a tax return
Pty Ltd company
- Setup: AU$576 to ASIC + AU$100–300 if you use a service like Cleardocs
- Ongoing: AU$310 annual ASIC review fee
- Accounting: AU$1,500–3,500/yr (company tax return is more complex)
Tax comparison
| Income | Sole trader tax | Pty Ltd tax (small business rate) |
|---|---|---|
| $50,000 | ~$6,700 | 25% flat = $12,500 (but you can leave profit in the company) |
| $120,000 | ~$29,500 | $30,000 |
| $250,000 | ~$78,000 | $62,500 |
At around AU$120k profit, the numbers cross over. Below that, sole trader is usually cheaper and simpler.
Liability
A Pty Ltd is a separate legal person. If it's sued or goes bankrupt, your personal house and car are (mostly) safe. As a sole trader, everything you own is on the line.
For skincare, food, or anything you might get sued over, the AU$576 for a Pty Ltd is cheap insurance.
Decision tree
- Do you own anything worth losing (a house, meaningful savings)? → Pty Ltd.
- Are you selling physical products consumed by humans? → Pty Ltd.
- Will you make over AU$120k profit this year? → Pty Ltd.
- None of the above? → Sole trader.
You can always upgrade later. Many founders spend their first 6 months as a sole trader validating demand, then convert once revenue is stable.
Written by Start Business in Australia Team · Published 2026-08-13