Sole Trader vs Company for Plumbers: What You Need to Know
- johnry8
- Nov 14
- 3 min read
Updated: Nov 17
Tax differences
As a sole trader, your profit is taxed at your personal marginal tax rate. A company, on the other hand, is taxed at a fixed rate of around twenty five percent, which becomes more beneficial as your plumbing business earns more.
Liability also differs. A sole trader is personally responsible for all business risks, which means your personal assets can be exposed. A company is a separate legal entity, giving you an added layer of protection, especially useful for plumbers handling bigger jobs or higher risk projects.
A company does come with more administration. You will need to maintain separate accounting records, lodge a company tax return, pay annual ASIC fees and manage a dedicated business account. While there is more compliance, many plumbing businesses find the protection, flexibility and potential tax savings worth the extra work.
When Should a Plumbing Business Consider Switching from a Sole Trader to a Company?
Here are the most common signs we see in Brisbane plumbing businesses:
1. Your profits are consistently high
If your annual net profit moves into the higher personal tax brackets, a company structure may be more tax efficient. Many plumbers find the difference noticeable once they consistently earn around two hundred thousand dollars net profit and above.
2. You own significant tools and equipment
Plumbers often hold expensive assets like jetters, CCTV drain cameras, vehicles and power tools. A company can help protect these assets and manage long term depreciation more effectively.
3. You are hiring staff or subcontractors
More people means more risk. A company structure can provide better protection for you and your team as you grow.
4. You are taking on bigger or more complex jobs
Commercial plumbing, new construction projects, maintenance contracts and real estate partnerships usually call for a company structure because risk and liability increase.
5. You want long term growth
If you plan to bring in partners, scale your operations or eventually sell the business, a company structure will make that journey easier.
Important Tax Considerations for Plumbers
Switching to a company is more than opening a new ABN. There are tax rules to consider, especially when transferring business assets like tools and vehicles. These transfers are treated as transactions and may trigger capital gains tax, stamp duty or balancing adjustments. Timing your changeover helps you avoid unnecessary tax costs.
If your turnover is over $75,000 thousand dollars, you must register for GST. Moving to a company means applying for a new ABN and new GST registration, then updating your invoices and bookkeeping to stay compliant.
A company also gives you more flexibility in how you take income through salary, dividends, or a mix of both. It can make managing payroll, super and workers compensation easier if you have apprentices or subcontractors.
The tax difference can be significant. For example, a sole trader earning $200,000 may be taxed at higher personal rates, while a company pays a fixed 25%. This allows more money to be reinvested in tools, staff and growth.
Here is a simplified process for switching structures:
Set up your company and receive an ACN
Apply for a new ABN
Transfer your business name and assets
Update contracts, insurances and suppliers
Notify clients and update invoices
Open a new business bank account
Update bookkeeping and payroll systems
Complete compliance tasks with your accountant
Staying a sole trader can still make sense if your income is modest, your work is low risk and you do not plan to expand. Simplicity has value too.
Rise Accountants supports plumbing businesses across Brisbane and QLD. We can review your structure, compare tax outcomes, set up your company and assist with bookkeeping, BAS, payroll and compliance.
If you are considering from a sole trader to a business Book your FREE 15-minute discovery call. We will help you understand your options and plan a smooth and confident transition.