When you’re starting a business, choosing the right structure isn’t just a legal formality – it’s a critical decision that can have major implications on your tax bill, profit distribution, and long-term flexibility.

At Trustify.au, we frequently see founders opting to set up a company with themselves as the sole shareholder. It’s a simple and seemingly logical choice – but it can also be an expensive one if you’re not aware of the tax and structuring limitations that come with it.

The Hidden Tax Pitfalls of the Sole-Shareholder Company
Here’s what many business owners don’t realise when they set up this way:

1. No Access to the 50% Capital Gains Tax (CGT) Discount
Companies are not eligible for the 50% CGT discount that individuals and trusts can access. So if your company sells a capital asset (like shares, IP, or real estate), you’ll pay tax on 100% of the gain, rather than just 50% of it. This can make a huge difference in the net outcome of a future business sale or asset disposal.

2. Dividend Taxation is Inflexible and Potentially Costly
If you’re the sole shareholder, any dividends must be paid to you personally. Even with franking credits, you may be required to pay top-up tax at your marginal rate – which for high earners could be up to 47%. There’s no opportunity to distribute income to a lower-taxed family member or another entity.

3. Lack of Flexibility in Managing Profits
A sole-shareholder company structure offers no flexibility in managing how profits are distributed or reinvested. You’re locked into a model where all income and capital returns flow through to one person – and that person is you.

A Smarter Alternative: Trust-Based Structures
To avoid these pitfalls and build a structure that supports tax efficiency and future growth, many business owners are now choosing to operate through:

A family trust

A unit trust with a family trust as unitholder

A company with a family trust as the shareholder

These structures provide significant benefits:

✅ Access to the 50% CGT Discount
Trusts (where eligible) can apply the 50% CGT discount on capital gains, significantly reducing tax on asset sales.

✅ Income Distribution Flexibility
Family trusts allow you to distribute income to multiple beneficiaries, including lower-income family members or other related trusts or entities, enabling strategic tax planning.

✅ Long-Term Tax Efficiency
By routing income and capital gains through a trust, you may be able to minimise tax legally and effectively, reinvest profits more smartly, and adapt as your personal and business circumstances change.

The Bottom Line
Starting with the right structure can save you tens or even hundreds of thousands of dollars in the long run. It also gives you more options for tax planning, reinvestment, and ultimately, a more profitable exit when the time comes.

At Trustify.au, we make it easy and affordable to set up the right structure from day one – whether that’s a family trust, unit trust, or company with a trust as shareholder.

🚀 Don’t limit your business with a one-size-fits-all structure. Let’s build the right foundation for your future success.

👉 Start your smarter business structure with Trustify.au today.