Is a sole trader different from a company for tax?
Compare sole trader and company tax treatment in plain English using official ATO guidance.
Summary
A sole trader and a company are different business structures with different tax treatment. A sole trader reports business income in their individual tax return, while a company is a separate legal entity and generally lodges a company tax return.
What this means
The structure you use affects tax reporting, registrations, record keeping, liability, and how income is treated.
A sole trader is simpler to operate, but the individual remains responsible for the business. A company has separate tax and reporting obligations.
Typical actions
- Review the ATO’s business structure guidance before choosing a structure.
- Consider tax, legal, liability, and administration differences.
- Check whether registrations such as ABN, GST, and PAYG withholding apply.
- Speak with a qualified professional before changing structures.
Official ATO sources
Last checked: 20 June 2026
Business structures — key tax obligations
Explains key tax obligations for sole traders, companies, and other structures.
Sole trader business structure
Explains the sole trader structure.
Company business structure
Explains the company business structure.
Related questions
- How is sole trader income taxed?
- What tax obligations do sole traders have?
- Do sole traders need an ABN?
- Do sole traders need to register for GST?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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