As a new financial year begins, many Australian business owners take time to reflect on the past 12 months and plan for the year ahead. It’s a chance to reset goals, streamline operations and make smarter financial decisions. One of the most impactful changes you can make right now is to rethink your business structure.

Your business structure affects far more than just your legal status – it influences your tax obligations, risk exposure, succession planning, access to capital and overall growth strategy. And yet, many businesses stick with the structure they started with, even if it no longer serves them.

With the new financial year underway, now is the time to assess whether your current setup – be it as a sole trader, company, or trust – still aligns with your business’s direction, growth and financial objectives.

Why You Should Rethink Your Business Structure

EOFY is the natural time to reassess where your business is heading. Many business owners use this period to meet with their accountant, review financial performance and make decisions that shape the new year. Among the most overlooked – but crucial – discussions is whether the current business structure still fits.

Changes in your income, the size of your operations, the introduction of business partners, or plans to expand are all strong indicators that your existing structure may be limiting rather than enabling your success. Staying with the wrong structure could mean paying more tax than necessary, risking personal assets, or missing growth opportunities. By taking a step back and choosing to rethink your business structure, you may set yourself up for stronger financial and operational outcomes in the years ahead.

Rethink Your Business Structure: Starting Out as a Sole Trader

Most Australian businesses begin as sole traders. It’s the simplest way to operate – easy to set up, minimal compliance and total control over your operations. Income is reported on your personal tax return, and there are fewer reporting obligations compared to other structures.

However, the simplicity of being a sole trader comes at a cost. Because there’s no legal distinction between the individual and the business, your personal assets are exposed to risk if something goes wrong. Tax planning is also limited – you’re taxed at individual marginal rates, which can quickly become expensive as your income increases. For sole traders with growing businesses, it’s worth considering whether this structure is still fit for purpose.

Rethink Your Business Structure: Is a Company the Better Fit?

Registering a company (Pty Ltd) introduces a separate legal entity. This means the business itself – not you as an individual – owns assets, enters into contracts and is responsible for debts. The major advantage is limited liability, which protects your personal finances if the business runs into trouble.

A company also offers greater flexibility for growth. It allows for shareholders, access to capital and often provides a more professional image when dealing with clients or lenders. Importantly, profits can be retained in the business or paid as dividends. From a tax perspective, base rate entities currently enjoy a flat 25% company tax rate, which is lower than the top marginal individual rate.

That said, companies come with greater compliance obligations. You’ll need to meet ASIC requirements, lodge separate tax returns and adhere to director responsibilities. It’s not a structure for everyone, but for those seeking growth, asset protection, or legitimacy in their industry, it’s often a logical next step.

Rethink Your Business Structure: Exploring the Strategic Role of Trusts

For some business owners, particularly those with family considerations or investment assets, a discretionary trust – often called a family trust – may be the best option. A trust can offer powerful tax planning benefits and protect assets from creditors.

In a trust structure, a trustee manages assets and income on behalf of beneficiaries. This enables income to be distributed flexibly, often in ways that reduce the overall tax burden across a family group. Trusts are also a useful tool for succession planning, as they provide a level of control and continuity that’s difficult to achieve in other structures.

However, trusts are more complex to establish and administer. They require annual distribution of income, and any retained earnings are taxed at the highest marginal rate. For this reason, trusts are usually most beneficial when guided by expert financial and legal advice.

Choosing the Right Structure: What to Consider When You Rethink Your Business Structure

Deciding whether to rethink your business structure depends on your goals, the nature of your operations and your appetite for complexity. A few key considerations include:

• Tax efficiency: Are you paying more tax than necessary under your current structure? Different setups offer varying opportunities for tax planning and income distribution.
  
• Risk and liability: Are your personal assets exposed? Structures that separate you from the business can shield you in the event of legal or financial troubles.
  
• Growth potential: Is your structure limiting your ability to scale? Consider whether your current setup supports bringing in investors, partners, or additional income streams.
  
• Compliance and administration: Can you manage the reporting and legal obligations of a more complex structure? Some business owners prefer simplicity, while others are prepared to handle more paperwork in exchange for greater benefits.
  
• Exit strategy and succession planning: If you plan to sell, retire, or pass your business on, your structure will play a major role in how smooth and tax-effective that transition is.
  

What Happens If You Stick With the Wrong Business Structure?

Failing to update your structure as your business evolves can lead to higher tax bills, exposure to personal risk and missed opportunities to grow or sell your business. Some owners only realise the limitations of their structure when it’s too late – like during an audit, a lawsuit, or a business sale negotiation.

By choosing to rethink your business structure proactively, you stay in control and ensure your setup aligns with your current and future goals.

Speak to the Experts Before You Rethink Your Business Structure

If you’re unsure where to begin, engaging with an experienced business consultant can provide clarity. At Wisdom Business Consultants, we work with Australian business owners to review their current setup and guide them toward the most strategic structure. Whether you’re operating as a sole trader, thinking of registering a company, or considering a trust, our advice is always practical, personalised and focused on your goals.

We look beyond tax and compliance – we help you create a structure that protects your interests, supports your growth and sets you up for long-term success.

The Time to Rethink Your Business Structure Is Now

The new financial year is the perfect time to take stock, regroup and make smarter decisions for the future. If your business has evolved, your structure should too. Don’t let a legacy setup hold you back.

Speak to the team at Wisdom Business Consultants and take the first step toward a structure that truly works for your business.