Sole trader vs company tax calculator (Australia)
Should you run your business as a sole trader or through a company? Enter your profit to compare this year's total tax. As a sole trader, your profit is taxed at individual rates with the low income and small business income tax offsets and the Medicare levy. A company pays 25% (base rate entity) or 30%, then pays you a salary and/or franked dividends, and the franking credits count against your own tax. The franking maths reproduces the ATO's worked examples. It uses the 2026-27 or 2025-26 resident rates.
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Franking credit calculator
Rates used
- Company tax: 25% for base rate entities (aggregated turnover under $50 million and 80% or less base rate entity passive income), otherwise 30%.
- Maximum franking credit = dividend × 1 ÷ gross-up rate, where the gross-up rate is (100% − company rate) ÷ company rate. That's 3.0 at 25% and 2.3333 at 30%.
- Individuals: resident tax rates for 2026-27 (15% from $18,201, 30% from $45,001, 37% from $135,001, 45% from $190,001) or 2025-26 (16% first rate). Also the low income tax offset, the 2% Medicare levy with the low-income reduction, and the small business income tax offset (16% of the tax on business income, up to $1,000).
- Franking tax offset: you include dividends plus franking credits in your income, then the credits reduce your tax. Any excess is refunded to resident individuals after other offsets and the Medicare levy.
Examples (ATO)
| Example | Result |
|---|---|
| Pederman Plastics, 27.5%: $100,000 × 1 ÷ 2.6364 | $37,930.51 |
| Dillmore Manufacture, 30%: $100,000 × 1 ÷ 2.3333 | $42,857.75 |
| Marlyn Pty Ltd: $3,000 credits on $11,667 (maximum about $5,000) | 60% franked |
| Rodney: $700 dividend + $300 credit = $1,000 income; tax $200 | $100 refund |
| John: tax $2,000 − other offsets $1,500 + Medicare $200 − franking $1,000 | $300 refund |
FAQ
Is a company cheaper than a sole trader in Australia?
Often only at higher profits. A base rate entity company pays 25%, which is less than the 30% and higher individual rates. But when the profit is paid to you as a dividend you pay your own rate, less the franking credit, so the main saving comes from profit kept in the company.
What is the company tax rate for small business?
Base rate entities pay 25%. That means aggregated turnover under $50 million and no more than 80% of assessable income from passive sources such as rent, interest and dividends. Other companies pay 30%.
How do you calculate franking credits?
Divide the dividend by the gross-up rate, which is (100% minus the company tax rate) divided by the company tax rate. At 25% that is 3, so a $75 fully franked dividend carries a $25 credit. At 30% the ATO example gives $42,857.75 of credits on a $100,000 dividend.
Do I get franking credits back as a refund?
Yes, if you’re an eligible resident individual. The credits reduce your tax, and any excess after your tax and Medicare levy is refunded. In the ATO example, Rodney has $300 of credits against $200 of tax and gets $100 back.
What is Division 7A?
Rules that treat loans, payments or forgiven debts from a private company to shareholders or their associates as unfranked dividends, unless they’re repaid or put under a complying loan agreement in time. It stops company profits being used privately without paying top-up tax.
Sources (checked 17 Oct 2026): ATO Company tax rates; Changes to company tax rates; Allocating franking credits; Refunding excess franking credits; Franking tax offsets; Tax rates for Australian residents; Small business income tax offset; Division 7A.
General information, not tax advice. This compares one year's tax for one owner who is an Australian resident. It ignores super, payroll tax, company running costs, trusts, the personal services income rules (which can stop a company from lowering tax on your own personal effort), capital gains, and the holding period rule. Get advice from a registered tax agent before you change your business structure.