Has your business outgrown its structure?

When you start a business, one of your first decisions is choosing the right operating structure and for many people that’s a sole trader, partnership, company or discretionary trust.

However, if the business grows strongly or your personal circumstances change, you may find you have simply outgrown this original business structure.

The different business structures

No single structure is right for every business. Your business structure determines how ownership, control, liability and tax are managed. The best option depends on factors such as liability exposure, tax outcomes, administration costs and succession plans.

A sole trader is the simplest business structure and offers full control but also full personal liability. A partnership consists of two or more people who share income, losses and liability.

Companies operate as a separate legal entity providing limited liability and a different tax rate but they also face greater complexity and regulatory obligations. Trusts are managed by a trustee on behalf of the beneficiaries and can offer asset protection, although they are generally more complex and expensive to operate.

Why change structures?

The announcement of several tax reforms may mean it’s time to take a fresh look at whether a different structure may be more appropriate or tax-effective.

Businesses often outgrow the structure that suited them when they started. Growth, new owners, succession planning or a change in strategic direction can all trigger a review.

Restructuring triggers

One issue likely to drive many restructures in the next few years is the upcoming tax changes affecting discretionary (family) trusts. From 1 July 2028, trustees of discretionary trusts will be liable for a 30 per cent minimum tax on taxable income, paid at the trust level.ⁱ

Changes to the Capital Gains Tax (CGT) rules may also prompt some businesses to consider restructuring. From 1 July 2027, the existing 50 per cent CGT discount will be replaced by cost base indexation and a 30 per cent minimum tax on real capital gains across all CGT assets held by individuals, trusts and partnerships.ⁱⁱ

Businesses expecting to dispose of major assets or ownership interests in future years may wish to reassess their structure if those gains will be affected by the new CGT rules.

The return of tax loss carry-back provisions from the 2026-27 financial year may also make a restructure more appealing for some businesses, as these provisions can generate significant cash refunds unavailable to businesses operating as sole traders or through trusts.ⁱⁱⁱ

Issues to consider before a change

In most cases, restructuring a business is not a quick exercise and it usually involves legal advice, accounting modelling and potential stamp duty implications. There may also be SMSF considerations and an impact on existing succession and estate planning strategies.

Although moving to a company structure may isolate a business from the implications of the new tax rules, it will also introduce new legal and tax obligations, a requirement to transfer existing business names and trademarks to the new entity, registration with ASIC, and the requirements of the Corporations Act.^iv

Existing contractual agreements with employees, suppliers and customers may also need to be renegotiated.

Trust versus company structure

The new tax rules for trusts represent a major change to the existing playing field, but how income flows from the business’ operating structure may decide the most appropriate structure for your business moving forward.

Trusts will still offer valuable asset and liability protection and full access to the Small Business CGT Concessions.^v

They will also continue to offer flexibility in the distribution of income, although the tax advantages may be reduced under the proposed reforms.

Companies operate as a separate legal entity and provide limited liability, asset protection, and access to company tax rates, although the overall tax outcome depends on how profits are ultimately distributed. They also provide easier access to capital, ownership transferability, dividend distributions and operational continuity.^vi

While a restructure can deliver tax, asset protection and succession planning benefits, the costs and implementation challenges mean careful modelling is essential before making a decision.

If you are considering changing your business structure, contact us for help.

i Tax reform | ATO
ii Tax reform | ATO
iii Tax loss carry back | ATO
iv Business structures and key tax obligations | ATO
v Applying the CGT concessions | ATO
vi Tax rates 2025–26 | ATO