Tax differences between a sole trader and a companySole traders and companies have similar tax and reporting obligations, but you should be aware of the key differences. In the table below, we detail the differences as well as some similarities.
|Tax-free threshold||The tax-free threshold for individuals is $18,200 in the 2019–20 financial year. A sole trader business structure is taxed as part of your own personal income.||There is no tax-free threshold for companies – you pay tax on every dollar the company earns.|
|Tax rates||Sole traders pay tax at the individual income rate|
|Lodging tax returns||An individual tax return needs to be lodged each year if you operate as a sole trader business.|
|Capital gains tax (CGT)|
|Small business entity concessions|
|Taxes and superannuation|
|Payroll tax||As a sole trader or a company, you can employ people. If you do, you may have a payroll tax obligation. Payroll tax is a state and territory tax on the wages you pay as an employer. Each state and territory government has its own payroll tax rules that you’ll need to comply with.|