This week in Let’s Talk, our experts share the tax structuring decisions SMEs need to get right from day one, before they become expensive to undo.
Most business owners don’t think much about structure when they’re starting out, they’re focused on getting the doors open, not on whether they’ve set up as a sole trader, company or trust.
But structure decisions made in the first few months of a business can quietly shape everything from how much tax you pay to how easily you can bring in investors, sell the business, or protect personal assets down the track. Unpicking the wrong structure later isn’t just a paperwork exercise, it can trigger capital gains tax, stamp duty, and significant accounting costs.
This week, we asked our panel of experts: what tax structuring decisions should SMEs make early that are much harder to fix later?
Let’s Talk!
Angus Killian, Country Lead ANZ, Carta
“The decisions hardest to fix are the ones founders make before there is anything to protect. Right now, those decisions are being made against a tax backdrop that is still being written.
Get your entity structure right from day one. With a 30% minimum tax on discretionary trusts proposed from 2028, the trust-versus-company question becomes more consequential than ever. While a three-year rollover window has been proposed from July 2027 to support small business restructuring, starting clean is always cheaper than cleaning up.
Issue founder shares early, while they are worth almost nothing, and agree on a vesting schedule when everyone is aligned and stakes are low. It is much easier to define ownership at the outset than to revisit it once a business has grown in value and complexity.
Set up your employee share scheme from day one. The CGT discount is being replaced with an indexation model, and a new concession for founders and ESS holders in eligible startups is currently under consultation. Since none of it is law yet, build flexibility into your scheme so you’re ready for either outcome.
A messy cap table or the wrong structure narrows your options later, usually when you can least afford the distraction, which is why it pays to plan early.”
Parteak Virmani, Business Services Manager, Polyglot Group
“Many SME owners focus on winning customers, hiring staff and managing cash flow. However, one of the most important early decisions they can make is getting their tax structure right, because it is often much harder and more expensive to fix later.
First, choose a structure that supports your long-term goals. Whether you operate through a company, trust, partnership or sole trader structure, the setup should align with plans for growth, capital raising, succession and an eventual exit.
Second, think beyond tax minimisation. Consider how profits will be distributed, how future investors may be introduced, and whether assets should be held separately from trading operations. These decisions can affect asset protection, tax efficiency and access to concessions such as the Small Business CGT Concessions. Addressing matters like Division 7A early can also help avoid unnecessary complications later.
Third, build for scalability. As businesses grow through acquisitions, overseas expansion or external investment, restructuring can become costly and may trigger capital gains tax, stamp duty and additional compliance obligations.
The best tax structures are not designed for where a business is today, but for where it intends to be in five years. A well-planned structure quietly supports growth in the background, while a poor one often reveals itself at the worst possible time: during expansion, investment or sale.”
Thomas Costanzo, Tax Specialist, Pitcher Partners
“The tax structuring decisions SMEs make early can be difficult and expensive to unwind later, so the starting point should be to align the structure with the owners’ commercial objectives.
Where a trust is used, a fundamental requirement is a trust deed—the “rule book” that governs its operation.
Ensuring the deed is tailored to the specific objectives of the individual or group is essential. If not properly tailored, it may not allow for distributions to key individuals or entities in the way it was intended.
SMEs also need to think about a structure that provides both asset protection and flexibility, particularly when considering a future exit strategy.
For example, operating a business through a discretionary trust may offer strong asset protection in the short term, but it can become restrictive if you later pursue an exit and an asset sale is not the preferred option.
Finally, where applicable, it is important to ensure that Family Trust Elections and Interposed Entity Elections are correctly established and aligned. This will minimise exposure to Family Trust Distribution Tax.”
Morgan Wilson, Founder and Director, creditte chartered accountants and advisors
“Most business owners do not think about structure until something forces the issue. A sale offer turns up. A partner wants in. A dispute lands. Only then do they look at how the business is actually set up.
Speed was never the problem. You can set up a structure quickly and still get it right. What actually goes wrong is setting up fast without asking where the business is going. Tax effectiveness and asset protection get skipped, not because there was no time, but because nobody asked the question that would have taken the same five minutes either way.
The better question from day one is not what is quickest to set up. It is where do I actually want to end up. Selling in five years. Handing it to family. Running it as a lifestyle business. Each path needs a different structure.
Get that conversation right early. Restructuring an operating business to fix a mismatch is expensive. Stamp duty. Capital gains tax. New bank accounts, licences, and paperwork that take months to untangle. None of that touches your actual business problem. It is just the cost of fixing a structure that should have matched your destination from the start.”
Cheree Woolcock, CEO & Director, DFK Benjamin King Money
“Many SMEs put a lot of emphasis on growth in those early years, but the tax structuring choices they make right at the start can follow them for a long while.
One of the biggest things to think about is choosing the right business set up. Whether it’s running as a sole trader, company, partnership, or a trust, each pathway brings its own consequences around taxation, protection of assets, compliance obligations and even how easily they can expand later. A structure might feel spot on at launch, but then suddenly it can get kind of boxed in as the business actually grows and adds complexity.
Another thing that gets missed far too often is planning for changes in ownership. If you’re expecting investors to come in, or you want to add new partners, or you’re working toward succession, getting the foundations right early can make everything easier. The way of structuring the ownership can leave a significant impact on the tax concession and reduce the risk of unexpected tax liabilities during succession events. It becomes more complicated, and you’re often left trying to redesign things after the fact when options may be more limited and costly.
The real point is that tax structuring should never be treated like some once-a-year taxation chore. It’s a strategic call, it affects flexibility, growth trajectory, and the long term value of the business.
So for SMEs, spending time on getting the structure right from the outset is usually far easier, and very much less expensive, than trying to fix core decisions years down the track.”
Scott Capelin, Founder, inLIFE Wellness
“One of the biggest mistakes I see business owners make is treating their tax structure as something they can tidy up later. The legal structure you choose, how you separate business and personal assets, where intellectual property sits, and how ownership is divided can all have significant tax and legal consequences as your business grows. Changing these decisions later can be expensive, trigger unexpected tax liabilities, or become incredibly complex once investors, franchisees or multiple entities are involved.
It’s worth investing in good accounting and legal advice from the beginning, even if it feels like an unnecessary expense in the early days. A well-designed structure doesn’t just minimise tax. It also protects assets, makes succession planning easier and gives you greater flexibility if you decide to sell, expand internationally or bring on business partners. Getting the foundations right early creates options, and in business, options are incredibly valuable.”
Maria Kathopoulis, CEO & Chief Marketing Officer, UNTMD
“Early stage tax structuring decisions carry more weight than most founders realise, and waiting until revenue grows to address them is a common and costly mistake.
Entity structure, trusts, shareholder arrangements, IP ownership, and director distributions all affect tax flexibility, asset protection, and future sale outcomes. In Australia, the difference between operating as a sole trader, company, discretionary trust, or group structure is significant. Once revenue scales, restructuring can trigger CGT events, stamp duty implications, or financing complications depending on how assets are held.
Founders mixing personal and business expenses early on also creates reporting, compliance, and valuation problems down the track.
The ATO consistently identifies preventable compliance errors among small businesses, including record-keeping, GST management, director obligations, and trust distributions, issues that compound as businesses grow.
Businesses that scale cleanly treat tax structuring as strategic infrastructure, not just compliance. Good structuring creates flexibility. Poor structuring becomes expensive to unwind.”
Lisa To, Partner + Head of Private Clients & Tax, Bartier Perry
“One of the hardest problems to fix later is poor documentation and weak governance. Many SMEs do not set up an audit-ready trail early, which becomes a major issue when the ATO or Revenue NSW reviews a structure. Without proper records, it is difficult to substantiate why assets sit where they do or how income has been treated.
A common mistake is purchasing real estate or other assets in the wrong entity, often based on an incorrect assumption about whether income is capital or revenue in nature. Business owners also frequently treat assets held in companies, trusts or SMSFs as personal funds, ignoring that each entity is taxed separately and at different rates.
Inadequate records of share and unit registers are another risk. Transfers of shares or units in companies and trusts holding real property over $2 million can trigger landholder duty, even where no real estate changes hands.
Other costly errors include breaching SMSF or trust rules, losing main residence exemptions, unexpected land tax and surcharge exposure, and failing to plan for departure from Australia where individual or trust are no longer tax residents of Australia.
Early advice and disciplined record-keeping prevent these issues from becoming expensive disputes later.”
Michael Russell, Managing Director, Finwave Finance
“The tax decisions that cost SMEs the most are rarely the ones they made badly. They are the ones they deferred until the business was too far down a particular path to change direction cheaply.
The structure you start with matters more than most accountants communicate at the time. A sole trader arrangement that makes sense at year one can become expensive to unwind at year four when there is goodwill, multiple income streams, or a business worth selling. Transferring assets between entities triggers capital gains events. Restructuring mid-flight is rarely clean.
Trust structures are the second area where early decisions compound. A discretionary trust gives you flexibility to distribute income across family members and manage tax across different marginal rates, but it needs to be set up before the income exists, not after you have already earned it personally.
The third is asset protection. Many business owners keep everything in the operating entity until something goes wrong. Separating property or equipment into a holding structure is straightforward early and legally complicated later.
The common thread is that tax structuring is not a compliance exercise. It is a planning decision with a long tail. The right time to get structural advice is when the business is still small enough that changing course is inexpensive.
That window closes faster than most people expect.”
Jordan Hearse, Accountant, Illumin8
“One of the biggest mistakes I see business owners make is waiting until they’re making good money before thinking about their structure. By then, changing it can become expensive, messy and sometimes trigger tax that could have been avoided.
The right structure isn’t just about paying less tax today—it’s about giving your business room to grow. A structure should support where you’re heading, whether that’s hiring staff, buying property, bringing in investors, protecting your personal assets or eventually selling the business.
Plenty of businesses start as sole traders because it’s quick and easy, but as profits increase, that same structure can start costing you money and limiting your options.
Getting the foundations right early is like building a house you want a solid base before adding the second story. A little planning now can save a lot of tax, stress and restructuring costs down the track.”
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