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Sole trader vs company tax comparison

Compare after-tax cash in hand as a sole trader versus operating through a company, at a given profit level.

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$
$
If using a company, profit is

Company structure wins

$2,338

Sole trader net cash
$110,162
Company structure net cash
$112,500

Detailed breakdown

Sole trader
Taxable income$150,000
Income tax (incl. Medicare)-$39,838
Net cash in hand$110,162
Company (25% rate)
Company tax-$37,500
Retained in company$112,500
Net cash in hand$112,500
  1. 1

    Taxed profit as a sole trader

    The full $150,000 profit is taxed at your individual marginal rates (brackets, LITO, Medicare levy), as if it were your only income.

    $39,838.00

  2. 2

    Applied the company tax rate

    Turnover of $500,000 is under the $50m base rate entity threshold, so the 25% company tax rate applies.

    $37,500.00

  3. 3

    Profit retained in the company

    After company tax, $112,500 remains in the company and is not yet taxed in your hands — this defers (but doesn't avoid) further tax until it's eventually distributed.

    $112,500.00

  4. 4

    Compared net cash in hand

    The company structure leaves you with $2,338 more after tax at this profit level.

    $2,338.00

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Assumptions

  • Assumes the business profit is the taxpayer's only taxable income for the year (no other salary or investment income stacked on top).
  • The 25%/30% company rate split uses only the aggregated turnover test — the '≤80% passive income' base rate entity condition is not modelled.
  • Fully franked dividend modelling assumes the shareholder's only income is the dividend itself, and that all franking credits are usable (no Division 7A loan, trust, or multiple-shareholder complexities).
  • Retained profit is shown net of company tax only — further tax may apply whenever it is eventually distributed.

Note

These figures are estimates only, based on the assumptions above. They do not constitute financial, tax, or accounting advice. Please consult a registered tax agent or accountant before making any decisions. We accept no liability for any loss arising from reliance on this calculator.