Every week someone sits down in our Myrtle Bank office and asks the same question: “Should I be a company, a trust, or just keep going as a sole trader?” It is the right question to ask, and in 2026 it is a harder one to answer than it was even a year ago. The May 2026 Federal Budget and the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 have changed the ground rules for capital gains, the High Court has rewritten how unpaid trust distributions to companies are treated, and Treasury is consulting on a minimum tax for discretionary trusts from 2028. If you run a small business in Adelaide, the structure that made sense when you started may not be the one that makes sense now.
This guide walks through the four common structures for South Australian small businesses, what each one actually does for you, and where the 2026 reforms bite. It is general information rather than advice, because the right answer depends on your income, your family, your growth plans and how you intend to exit one day.
Sole trader: simple, cheap, and fully exposed
Most Adelaide businesses start here, and for good reason. A sole trader needs an ABN, registers for GST once turnover passes the threshold, and reports business income on their own personal return. There is no separate entity to administer, no ASIC annual review fee, and no second set of accounts. If the business loses money in its early years, the loss can generally offset your other income, subject to the non-commercial loss rules.
The trade-offs are two. First, every dollar of profit is taxed at your personal marginal rate, which tops out at 45 per cent plus Medicare once you pass $190,000. Second, there is no separation between you and the business: a contract dispute, a workplace injury claim or a bad debt lands on your personal assets, including the family home. For a tradie working alone or a consultant earning under six figures, the simplicity usually wins. Once profit climbs or you start employing people, the exposure starts to matter.
Partnership: shared profit, shared liability
A partnership is simply two or more people (or entities) carrying on business together. It has its own TFN and ABN and lodges its own return, but it pays no tax itself; each partner reports their share. Partnerships are common in Adelaide among husband-and-wife businesses and small professional practices because they allow income to be split according to the partnership agreement.
The catch is joint and several liability. Each partner is personally liable for the debts of the partnership, including debts run up by another partner. A written partnership agreement is not optional; it is the only thing that sets out what happens when one partner wants out, falls ill, or the two of you disagree. We see far too many Adelaide partnerships operating on a handshake, and they are the ones that end up in our office in the worst circumstances.
Company: the 25 per cent rate, and what it costs you
A proprietary company is a separate legal person. It owns the business assets, signs the contracts and carries the liabilities, which is the asset-protection benefit most owners are chasing. It also pays tax at a flat rate: 25 per cent for a base rate entity (aggregated turnover under $50 million and no more than 80 per cent passive income), or 30 per cent otherwise. For an owner whose business profit would otherwise be taxed at 37 or 45 per cent, leaving profit in the company to fund growth is an obvious win.
The flat rate is not a free lunch, though. Profit paid out as dividends is taxed again in the shareholder’s hands, with a franking credit for the company tax already paid, so the total tax on fully distributed profit ends up at the shareholder’s marginal rate anyway. The benefit is deferral and reinvestment, not avoidance. And if you take money out of the company informally, Division 7A treats it as a deemed dividend unless it is put on a complying loan agreement at the benchmark interest rate, which rises to 8.77 per cent for 2026-27. We unwind a lot of Division 7A problems for Adelaide business owners who simply did not know the rule existed.
Companies also carry fixed costs: ASIC registration, an annual review fee that rose again from 1 July 2026, separate financial statements and a company tax return. And from a capital gains point of view, a company is the least attractive structure of the four. It has never been entitled to the 50 per cent CGT discount, which matters if you plan to sell the business one day.
One change in the company’s favour: the 2026 Budget introduced a loss carry-back for companies from 1 July 2026, so a company that turns a profit, pays tax, then has a loss year can claim a refund of earlier tax rather than waiting to use the loss in future. For cyclical Adelaide businesses in construction, hospitality and agriculture, that is worth knowing about.
Discretionary trust: flexible, popular, and now in Treasury’s sights
The family discretionary trust has been the default structure for a generation of South Australian small businesses, usually with a corporate trustee for asset protection. The trustee decides each year which beneficiaries receive the income, which lets a family spread profit across lower-earning spouses and adult children. Trusts have also enjoyed the 50 per cent CGT discount on business sales, something companies cannot access.
Three things have shifted in 2026 and anyone in a trust should understand them.
The first is the Bendel decision. In June 2026 the High Court confirmed that an unpaid present entitlement to a corporate beneficiary (the classic “bucket company” distribution that is declared but never actually paid) is not a loan for Division 7A purposes. The ATO has withdrawn its 2022 determination to the contrary. That is a win for trusts on the face of it, but the ATO has made clear it will look to Subdivision EA and section 100A instead, so nobody should read Bendel as a green light to park trust profit in a bucket company indefinitely.
The second is the CGT discount reform. From 1 July 2027 the 50 per cent discount for individuals and trusts is replaced with cost base indexation plus a 30 per cent minimum tax rate on capital gains. Gains accrued before that date keep the old discount treatment, which is why we are already talking to Adelaide business owners about valuations at 30 June 2027. A trust still beats a company on the sale of a business after 2027, but the margin narrows.
The third is the one to watch most closely: the Government has announced, and Treasury is consulting on, a 30 per cent minimum tax on discretionary trusts from 1 July 2028. As proposed, the trustee pays the minimum tax and individual beneficiaries receive a credit, but corporate beneficiaries receive none. The stated purpose is to end the bucket-company strategy. It is not law yet, and the details may change, but a three-year restructure rollover from 1 July 2027 is part of the package. If you operate through a trust and distribute to a company each year, this is the reform that will most change your numbers, and there is a window to plan for it.
The small business CGT concessions still matter
Whatever structure you choose, the four small business CGT concessions remain in place for 2026-27: the 15-year exemption, the 50 per cent active asset reduction, the retirement exemption and the rollover. They can reduce the tax on selling a business to nil in the right circumstances, and the active asset reduction’s turnover threshold is slated to rise to $10 million from 1 July 2027. Eligibility turns on the $2 million turnover or $6 million net asset tests and on who owns what, which is exactly where structure decisions made years earlier come home to roost. Getting shares or trust interests into the right hands before a sale, not after, is the difference between a concession and a missed one.
What about South Australian payroll tax and super?
Two state-and-employer points catch growing Adelaide businesses regardless of structure. South Australian payroll tax applies once your Australia-wide wages pass $1.5 million, phasing up to 4.95 per cent at $1.7 million, and RevenueSA groups related entities together, so splitting a business across a company and a trust does not get around it. Separately, Payday Super started on 1 July 2026: superannuation guarantee at 12 per cent must now reach employees’ funds within seven business days of each pay run rather than quarterly. If you are still running super on the old quarterly cycle, fix that now.
Choosing, and changing
A rough rule of thumb for Adelaide small businesses: start as a sole trader if you are testing an idea and your profit is modest; move to a company or a trust with a corporate trustee once you employ staff, take on real liability or earn enough that the marginal rate hurts; and think hard about the trust-plus-bucket-company model given what is coming in 2027 and 2028. The best structure is the one that fits where the business is going, not where it was.
Changing structure has its own tax consequences, although the small business restructure rollover and the proposed three-year rollover window for trusts can take much of the sting out. What does not work is leaving it until the week before a sale, a partnership dispute or an ATO review.
If you would like to talk through your own structure, our business advisory team and small business accountants work with owners across Adelaide and regional South Australia every day. You can also read our guides on the 2026 property tax changes and structuring a private medical practice, or get in touch with us directly.
This article is general information only and does not take into account your personal circumstances. Several of the measures described were announced or legislated in 2026 and some are still subject to consultation; seek advice tailored to your situation before acting.
