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Company

A Company tax structure is a separate legal entity; it鈥檚 detached from you personally, as you become a shareholder of the business. The commercial risk aspect for a Company is very good, because the company itself is liable and not its individual shareholders.

The set-up cost is much more expensive than that of a Sole Trader or Partnership 鈥 it costs up to $1,000 just for the establishment fees. The marginal tax rate is very good, as it鈥檚 a flat rate of 30%, no matter how much income you earn.

Administration for a company is a little more complex, as you are governed by ASIC. You have to work under corporation laws, which means ASIC tells you what you can and cannot do. Also, employment laws govern companies, and because you and the company are separate entities, technically you now work for the company 鈥 even if you own it.

When running a company, the implication is that the PAYG law, the FBT (Fringe Benefit Tax), superannuation, Work Cover, and even payroll taxes become relevant.

Companies cost more to run, but the advantage is you can 鈥榩ark鈥 your profits within the company. You can choose to pay yourself a lower wage, and in doing so, you鈥檒l pay a lower marginal tax rate while the rest of the money stays in the company as a retained earning. Put simply, becoming a company limits your liability, and is a very effective tax structure.