Sole Trader vs Company: Choosing a Business Structure as a Support Worker

Sole Trader vs Company: Choosing a Business Structure as a Support Worker

Once you've decided to work as an independent support worker rather than as someone's employee, a second, separate question comes up fast: do you operate as a sole trader, or set up a company? It's easy to assume a platform like CareVicinity has a preference here. It doesn't - the only structural requirement is a valid ABN. What follows is how each option actually works, using ASIC and ATO information rather than a general rule of thumb.

In short: most independent support workers start out as sole traders - it's the simplest, cheapest way to hold an ABN and get working, and you're personally responsible for the business either way you set it up. A company is a separate legal entity that can offer more liability separation and a flat tax rate, but it costs more to set up, has ongoing ASIC obligations, and suits a different stage of business than most support workers are starting from. Neither is required to work through CareVicinity - a registered ABN is.

If you haven't yet confirmed you're working as an independent contractor rather than an employee, that's a different question - see independent support worker vs employee: what's the difference first.

The two options, in plain terms

A sole trader is the simplest business structure in Australia: you and the business are the same legal entity. You trade under your own name (or a registered business name), use your own Tax File Number for tax purposes, and there's no separate registration step beyond getting an ABN.

A company (most commonly a proprietary limited, or Pty Ltd, company) is a separate legal entity, registered with the Australian Securities and Investments Commission (ASIC). It has its own ABN, its own tax obligations, and its own set of ongoing compliance requirements, independent of you personally.

Liability: what happens if something goes wrong

This is usually the first real difference people ask about. As a sole trader, you and the business aren't legally separated - you're personally liable for the business's debts and legal obligations, and your personal assets aren't shielded from business ones.

A company is a separate legal entity, which generally keeps your personal assets separate from the company's debts. That protection isn't absolute: directors can still be personally liable in specific circumstances, such as unpaid PAYG withholding or trading while insolvent.

How each structure is taxed

As a sole trader, your business profit is simply your personal income. It's taxed at individual marginal tax rates, the same scale that applies to any other income you earn, with the top rate (plus the Medicare levy) applying once your total income reaches the higher brackets. Rates are indexed and can shift - the ATO's current individual income tax rates are the place to check the exact figures for the year you're filing.

A company pays tax at a flat company tax rate instead: 25% for a "base rate entity" (broadly, a company with aggregated turnover under $50 million where no more than 80% of its assessable income is passive income), or 30% for companies that don't meet that test. This is a fixed rate regardless of how much the company earns, which is a genuinely different mechanism to the sliding scale a sole trader is taxed on.

Setup cost and complexity

Getting started as a sole trader costs nothing beyond your own time - an ABN is free to register, and a registered business name (if you want one) currently costs $47 for one year or $108 for three, per business.gov.au.

Registering a company is a bigger step: business.gov.au lists the standard proprietary limited company registration fee at $636, on top of the same free ABN and any business name cost. These figures are indexed and change periodically, so check business.gov.au or asic.gov.au for the current fee before you budget for it.

Ongoing admin: what you commit to each year

A sole trader's ongoing obligations are comparatively light: keep business records for five years, and notify the relevant agencies of changes (like an address) within 28 days.

A company carries more: financial records must be kept for seven years, a separate company tax return is lodged each year (in addition to your own personal return), and ASIC requires an annual company review with its own review fee to keep the company registered. Officeholders also have ongoing legal duties - keeping company details current on the register and maintaining proper records.

Comparison at a glance

• Liability. Sole trader: personal, no separation from business debts. Company: separate legal entity with some protection, with director exceptions.

• Tax treatment. Sole trader: individual marginal rates (personal income). Company: flat company tax rate (25% or 30%).

• Setup cost. Sole trader: free ABN, plus an optional business name at $47-$108. Company: ASIC registration fee (business.gov.au lists $636) plus the same ABN/business name costs.

• Ongoing admin. Sole trader: records kept 5 years, lighter reporting. Company: records kept 7 years, a separate tax return, and an annual ASIC review.

• Often best suited to. Sole trader: starting out, simpler income, lower setup cost. Company: higher, more established income where the extra structure earns its cost.

Does CareVicinity require a particular structure?

No. To work through CareVicinity as an independent support worker, the confirmed requirements are a current police check, a registered ABN, and two professional references. There's no requirement to operate as a sole trader or to incorporate a company - that choice is entirely yours, and it doesn't change your status as an independent contractor either way.

When to get professional advice

Everything above is general, publicly available information about how each structure works. Which one actually suits you - given your income, how much liability protection matters to you, and your plans for the business - is a decision worth taking to a registered tax agent or accountant. They can model it against your real numbers in a way a general article can't.

Once you've settled on a structure, record-keeping and expenses for independent support workers covers the ongoing habit of keeping your paperwork in order, whichever structure you choose. If you're still confirming the ABN and GST basics first, ABN and GST basics for support workers covers that step.

FAQ

Do I need an ABN either way? Yes. An ABN is required whether you're a sole trader or operating through a company, and it's also CareVicinity's confirmed requirement for independent support workers.

Can I start as a sole trader and become a company later? Yes - moving from sole trader to company is a common path as a business grows, though it does involve its own registration and transition steps. A registered tax agent or accountant can walk you through what that involves when the time comes.

Does a company protect me from all liability? No. A company structure generally separates personal and business assets, but directors can still be personally liable in specific situations, such as unpaid PAYG withholding or insolvent trading. It reduces exposure - it doesn't remove it entirely.

Is one structure cheaper to run? Yes, in almost every case a sole trader is cheaper to set up and run - no company registration fee, no annual ASIC review fee, and lighter record-keeping. That's a real, current-cost consideration alongside the tax and liability differences above.

Ready to start as an independent support worker?

Whichever structure you choose, CareVicinity's requirement is the same: a valid ABN. See what it takes to get started delivering care through CareVicinity.