If your business structure was set up when you were turning over $200K and you’re now turning over a few million, there’s a fair chance it has stopped doing its job. The setup was probably right at the time. At $5M, it might be the most expensive thing in your business.
Nobody gets this wrong on purpose. You start out flat chat, someone sets you up as a sole trader or a simple trust, and it works for a while. Then the business grows, your family situation changes and the tax rules keep moving. The structure doesn’t. In Episode 31 of Business Uncut, Reuben walks through five signs your structure has outgrown you, the traps to avoid when you fix it, and one job to do this week.
The slow drift: a hypothetical example
Let’s say, hypothetically, you run a construction business turning over $5M with $800K profit, all in your own name as a sole trader. Being a sole trader means you and the business are legally the same person. Every dollar of that profit is taxed at your personal rate, and if a job goes bad and someone sues, your house is on the table.
That’s the real problem. It’s rarely one big mistake. It’s a slow drift between the business you’ve built and the structure it sits in. Here are the five signs it has happened to you.
Sign 1: You’re still a sole trader or partnership at a few million turnover
Every dollar of profit hits your personal return, and there’s no wall between business debts and your home. The builder in the example above is exposed on both counts: the tax and the risk.
The principle: separate you from the risk.
Sign 2: Profit is piling up, but you’re paying top personal rates on it
Hypothetically, you leave $300K in the business for stock. As a sole trader or partnership, that profit is taxed in your hands whether you take it out or not, so it’s taxed like you spent it, even though it’s sitting on the shelf. A company can usually hold retained profit at a lower rate.
The principle: tax should follow where the cash sits.
Sign 3: Your family trust is paying out to a bucket company
A discretionary trust is a family trust where you pick who gets the income. A bucket company is a company that catches some of that trust income. Under a proposal from the May Budget, which is not law yet, from 1 July 2028 the trustee would pay at least 30 per cent, and company beneficiaries would get no credit for it. Combined, that could mean 55 to 60 per cent.
The draft is out and consultation has closed, but the detail could still change. We cover the proposal in more depth in Family Trust Tax Changes: 5 Steps Before the 30% Minimum.
The principle: plan for proposals, don’t panic over them.
Sign 4: Your property or IP sits next to the risk
If your property or IP (your brand or your software) sits in the same company or trust that signs contracts and hires staff, that isn’t really a tax problem. It’s a risk problem. One bad claim can reach the lot.
The principle: keep the crown jewels away from the coalface.
Sign 5: You’re thinking of selling
This one is law now. From 1 July 2027, the 50 per cent discount on capital gains tax (the tax on the profit when you sell) is replaced by indexation, which lifts your cost for inflation, plus a 30 per cent minimum tax. The small business CGT concessions stay, but your structure affects whether you qualify for them.
If a sale is on the horizon, read CGT Changes 2027: 4 Checks Before You Sell Your Business for the detail.
The principle: structure for the exit early.
The traps when you fix it
- Restructuring in a panic over the trust proposal. It’s still a draft, consultation has closed, and the detail could change.
- Assuming moving assets is free. There’s proposed rollover relief, meaning you could shift assets without triggering tax, from 1 July 2027 to 30 June 2030. It’s a proposal, and it doesn’t cover stamp duty or GST.
Your structure isn’t a tattoo. You can change it. Just do it with a plan. If you’re weighing up the options, Trust vs Company 2026: 5 Steps Before You Restructure walks through how to choose.
Your one action this week
Grab a single page and draw your structure: every company and trust, who owns what, and where the profit lands. If you can’t draw it, that’s your answer.
Frequently asked questions
When should a sole trader change business structure?
There’s no single turnover figure that decides it. The warning signs are profit you can’t keep in the business without paying top personal rates, and business risk you can’t separate from your personal assets. At a few million turnover, a sole trader or partnership often has both. The right answer depends on your situation, so talk it through with your adviser.
What is a bucket company?
A bucket company is a company that receives distributions from a discretionary (family) trust, so some of the trust’s income is taxed in the company rather than at top personal rates. A May Budget proposal would change how this works from 1 July 2028, but it is not law yet.
Does it cost money to restructure a business?
Often, yes. Moving assets between entities can trigger tax, stamp duty and GST. Proposed rollover relief from 1 July 2027 to 30 June 2030 would let you shift assets without triggering tax, but it wouldn’t cover stamp duty or GST, and it is still a proposal.
Should property or IP sit in my trading company?
If property or IP sits in the same entity that signs contracts and hires staff, one bad claim could reach it. Holding it away from the trading side is one way to separate it from that risk, but moving assets can carry tax and duty costs, so get advice before you move anything. Our guide to asset protection strategies covers more of the options.
If any of those signs hit home, book a strategy call with New Wave and we’ll map your structure with you. You can also listen to Business Uncut on Spotify for more episodes like this one.
General information only, not personal tax, legal or financial advice. Figures are hypothetical examples. Talk to your adviser about your own situation.
