Switching from Sole Trader to Company - Costs, Tax & ABN Changes Explained (2025 Guide)

If you’re a sole trader looking to grow, there may come a time when switching to a company structure makes sense - for tax savings, client requirements, or asset protection.

The good news? Incorporating isn’t complicated once you understand the costs, tax differences, and registration steps.

In this guide, we’ll cover:

• The main reasons sole traders decide to incorporate
• Up-front and ongoing costs of running a company
• How tax rates compare at different profit levels
• The ABN, ACN, and business name changes you’ll need to make
• Six key steps to switch smoothly
• Common pitfalls and how to avoid them

Why many sole traders decide to incorporate

Higher turnover, larger clients, possible investors, and separating personal assets from business risk are the most common reasons for switching.

Once annual profit climbs past roughly $150,000, the flat 25% company tax rate can beat personal marginal rates that approach 45%.

Up-front and ongoing costs you’ll face

• ASIC registration fee: $611 (proprietary limited company, 2025 rate)
• Business name registration: $45 is the cost to register for one year
• Registered office: $300–$600/year if you rent one (many sole directors use their own address)
• ASIC annual review fee: $329 (for proprietary companies)
• Professional bookkeeping + accounts: $2,000–$5,000/year

💡 Quick estimate: Around $800 to set up depending on who you register with and around $2,000–$3,000/year in extra admin costs.

The tax difference in real dollars

• At $90,000 profit: Sole trader ~ $19,600 tax, company = $22,500 → no savings
• At $150,000 profit: Sole trader ~ $40,000, company = $37,500 → saving ~ $2,500 but may not be enough if you consider the cost to set up a company and extra running costs
• At $250,000 profit: Saving > $20,000

Note: The higher your profit, the more attractive the company rate may become.

ABN, ACN and business-name changes

• When you register the company, ASIC issues an ACN (Australian Company Number)
• Apply for a new ABN linked to that ACN - your sole trader ABN can’t be transferred
• Decide whether to cancel or keep the old ABN (only keep it if you still earn personal service income separately)
• Transfer any registered business name from you as an individual to the company via ASIC Connect

Six steps to make the switch smoothly

1. Speak with your accountant to lock in timing and share structure
2. Reserve the company name (optional) in ASIC Connect
3. Register the Pty Ltd, pay ASIC’s fee, and receive your ACN
4. Apply for the company ABN via the ABR portal or a registration service
5. Update every contract and invoice - the old ABN must disappear once the company starts trading
6. Update sole trader ABN details: cancel GST or PAYG if no longer needed and lodge a final sole trader return

Pitfalls people overlook and how to avoid them

• Invoicing under the old ABN after incorporation: Always invoice with the new company ABN from your official start date
• Forgetting the ASIC annual review fee: Late fees start at $98 - set a recurring calendar reminder
• Using a personal bank account: Open a company account immediately - see our business-bank-account guide

Switching structure is a once-off admin job that can deliver long-term tax savings and asset protection. Map your timeline, set aside the set-up costs, register the company, and update every record in the same week - you’ll thank yourself at the next BAS.