It depends entirely on whether the profit gets drawn out or left in the business, not on which structure sounds more "official." At real numbers, the difference is worth thousands of dollars a year, and it isn't the difference most owners expect.
What $250,000 profit actually looks like in each structure
As a sole trader, all $250,000 is taxed at individual marginal rates whether it's drawn out or not, there's no legal separation between the business and the owner. Under the 2025-26 resident rates, tax on $250,000 comes to $78,638, plus the 2% Medicare levy of $5,000, for total tax of $83,638. Net in the owner's hands: $166,362.
As a company, the business pays the 25% base rate entity company tax rate on the same $250,000, $62,500, leaving $187,500. If that $187,500 is fully distributed to the owner as a fully franked dividend, the owner picks up a $62,500 franking credit alongside it, and under Australia's imputation system the total tax paid, company plus the owner's top-up, comes to the same $83,638 as the sole trader. Same $166,362 in the owner's pocket either way. This is the part almost every "just set up a company" conversation skips: full distribution doesn't save tax by itself.
Where the real advantage actually sits
The advantage shows up the moment profit is not fully distributed. A sole trader pays full marginal tax on all $250,000 every year, regardless of how much is actually spent personally. A company only pays the flat 25% on profit kept working in the business, $62,500, deferring the remaining $21,138 in tax until, or unless, that money is ever drawn out personally. For a business reinvesting in stock, equipment, staff, or paying down debt rather than distributing every dollar, that's a genuine, ongoing cash advantage, not a one-off saving.
A discretionary trust adds a third lever again: the ability to split that $250,000 across multiple beneficiaries, a spouse, adult children, each taxed at their own marginal rate, which can lower the total tax bill below either the sole trader or company figure above, if there's a genuine family group to distribute across. It doesn't help a sole operator with no one else to distribute to.
What the trust split actually looks like in numbers
Split evenly between two adults with no other income, $125,000 each, the tax works out very differently to either structure above. Tax on $125,000 at 2025-26 rates is $28,288, plus $2,500 Medicare levy, $30,788 per person. Across two people, that's $61,576 combined, against $83,638 for the sole trader or the fully distributed company figure. A genuine saving of $22,062, not from hiding income, but from spreading it across two people's tax-free thresholds and lower brackets instead of stacking it all on one.
What the tax saving doesn't include
None of this accounts for what running a company or trust actually costs, annual ASIC fees, more involved accounting, a trust deed and its own compliance obligations, all real costs a sole trader doesn't carry. For a business well under $100,000 profit, that overhead can outweigh the tax benefit entirely. The calculation above only pays off once profit is genuinely at a level where the structure's advantage, deferral, splitting, or asset protection, is worth more than what it costs to run. Getting the right business structure sorted before the business is even registered, rather than fixed six months later, is exactly what Business Foundation is built to help with.
The one-line version
At $250,000 profit, drawing everything out is roughly tax-neutral between sole trader and company. The company's real advantage is deferring tax on profit that stays in the business. A trust's real advantage is splitting income across people, not deferring it. The right structure depends on what actually happens to the money, not the label on the entity.
This is general information based on published 2025-26 ATO rates, not personalised tax advice. It doesn't account for deductions, offsets, other income, asset protection, or family group circumstances, worth running the actual numbers with a registered tax agent as the business changes, not assuming last year's answer still holds.
Sole trader, company, or trust: which structure actually saves money?
It depends on whether profit is drawn out or retained. At $250,000 profit, full distribution is roughly tax-neutral between sole trader ($83,638 total tax) and a fully franked company distribution (same $83,638 combined). The company's real advantage is deferring tax on profit kept in the business, taxed at 25% instead of individual marginal rates, until it's drawn out. A trust's advantage is splitting income across a genuine family group, not deferral.
Not sure which structure actually fits your numbers? Start with a free Business Foundation conversation.