Australia companies, holding companies and trusts
What each one saves, what it costs to run every year, the point where it starts paying for itself, and where people get caught out. 2025-26 figures.
A structure is a tool, not a trick. If the yearly cost of running it is bigger than the tax it saves, you are worse off. Nobody should set any of these up in Australia without a qualified adviser running your real numbers first.
Real numbers from people using these
Trade through a company
The company pays 25% on profits it keeps, instead of your personal rate up to 47%.
Defers tax on profit you do not need to live on, and separates business risk.
$600 to $2,500 to set up, then $1,500 to $4,000 a year.
Worth it when: Usually once profit is above roughly 120,000 and you can leave some of it in the company.
Ellie, 39, runs a landscaping business in Adelaide with $200,000 of profit
She draws $110,000 to live on and leaves $90,000 in the company at 25%.
The retained $90,000 is taxed $22,500 instead of about $37,000 personally, so $14,500 stays in the business this year. Accountancy runs $1,500 to $4,000. The gap is settled later through franked dividends.
Rule behind it: Base rate entity company tax 25%, franking credits on dividends
Have an adviser set this one up.
Family (discretionary) trust
A trust earns the income and each year the trustee decides which family member receives it.
Income can go to lower rate adults, and the 50% capital gains discount still flows through.
$1,500 to $4,000 to set up, then $1,500 to $4,000 a year.
Worth it when: Worth it when there are adult family members on lower rates and profit above about 100,000.
The Tran family, Melbourne, $140,000 of trust income from a business and two rentals
Instead of all of it landing on Minh at 45%, the trustee gives $18,000 each to two adult children at university and the rest to Minh's lower earning partner.
The $36,000 shared out is taxed at almost nothing rather than 45%, saving around $15,000 a year, against $1,500 to $4,000 of trust costs.
Rule behind it: Section 100A and personal services income rules apply, minors taxed at penalty rates
Have an adviser set this one up.
Every Australia structure, with the risks
Trading through a company
Some admin- Best for
- Profits you want to reinvest rather than spend
- What it saves
- Retained profit is taxed at 25% instead of up to 47%
- What it costs
- ASIC fees and accounting, roughly 2,000 to 4,000 a year
- Break even
- Usually worth it above about 100,000 of profit you do not need to draw
How it is set up
- Register the company and apply for an ABN and TFN.
- Decide on salary versus dividends, and note franking credits when you pay yourself.
- Keep company money separate from personal money.
Watch out: Taking money out as a loan instead of a dividend triggers Division 7A, which is an expensive mistake.
Discretionary (family) trust
Serious admin- Best for
- Families with adult members on lower tax rates and assets to protect
- What it saves
- Income can be distributed to whoever has the lowest marginal rate, and the 50% CGT discount flows through
- What it costs
- Setup 1,500 to 3,000, plus a return each year and a trustee company if used
- Break even
- Worth considering above about 100,000 of business or investment income
How it is set up
- Have an accountant or lawyer establish the trust deed.
- Make and document distribution resolutions before 30 June each year.
- Distribute deliberately, not retrospectively.
Watch out: Distributing to family members who never receive the money is exactly what the ATO targets under section 100A.
Holding company above the trading company
Serious admin- Best for
- Business owners wanting to bank profits away from trading risk
- What it saves
- Franked dividends can move up to the holding company without extra tax
- What it costs
- A second company to run and file for
- Break even
- Worth looking at once the business retains six figures
How it is set up
- Get advice on rollover relief before restructuring.
- Pay franked dividends up to the holding company.
- Keep investments out of the trading entity.
Watch out: Restructuring an existing group can trigger CGT and stamp duty if it is done without rollover relief.
Investment property and negative gearing
Light admin- Best for
- Higher rate earners with a long horizon
- What it saves
- Net rental losses reduce your other income now, and the 50% CGT discount applies on sale after 12 months
- What it costs
- You are genuinely losing money each year, so it only pays off if the property grows
- Break even
- Only sensible on a 37% or 45% marginal rate with real growth prospects
How it is set up
- Get a depreciation schedule before your first return.
- Keep interest on the investment loan strictly separate from personal borrowing.
- Plan the sale year, because the gain lands on top of your income.
Watch out: A loss is still a loss. Negative gearing is not a saving unless the property actually appreciates.
Small business CGT concessions on exit
Some admin- Best for
- Owners selling a business with turnover or net assets under the thresholds
- What it saves
- Can reduce or entirely eliminate the gain, and let you put a large amount into super
- What it costs
- Strict tests on active assets, turnover and net asset value
- Break even
- Check eligibility well before you sign anything
How it is set up
- Test the small business entity and active asset conditions.
- Decide between the 15 year exemption, retirement exemption and rollover.
- Coordinate any super contribution with the CGT cap.
Watch out: Eligibility is tested at the time of sale, so restructuring the day before rarely works.