The structure you run your business through - sole trader, company, partnership, or trust - shapes how much tax you pay, how exposed your personal assets are, and how flexibly you can manage income. For many business owners, the structure was chosen once, years ago, and never revisited.
In 2026, revisiting it matters more than usual. The High Court's Bendel decision reshaped the tax treatment of trust-and-company structures, and a proposed minimum tax on trust income from 2028 is on the horizon. The right structure today may not be the one you set up with.
Not sure your structure still fits your business? With the Bendel decision and the 2028 trust tax changing the landscape, now is a good time to review.
Book a Free Consultation →The Main Structures Compared
Sole trader. Simplest and cheapest. All income is taxed at your personal marginal rates. No liability protection - your personal assets are exposed. Works well at lower income levels or where risk is genuinely low.
Company. A flat 25% tax rate for base-rate entities and limited liability protection. Higher setup and compliance cost. No access to the 50% CGT discount on the sale of business assets held directly by the company. Suits businesses with higher income and real commercial risk.
Discretionary trust. Flexible income distribution to beneficiaries, access to the 50% CGT discount through individual beneficiaries, and asset protection potential. More complex and more expensive to run. Under significant and increasing ATO scrutiny - and directly affected by the changes below.
Partnership. Each partner is taxed individually on their share. The key risk is joint and several liability - each partner is personally liable for the full obligations of the partnership, not just their share.
What Bendel Changed
Many businesses run a trust that distributes income to a "bucket company" taxed at the company rate, leaving the entitlement unpaid in the trust. For years the ATO treated that unpaid present entitlement as a Division 7A loan, requiring complying loan terms or risking a deemed dividend.
In June 2026 the High Court rejected that position in the Bendel decision - an unpaid present entitlement is not, on its own, a Division 7A loan. The ATO's Decision Impact Statement confirmed it will administer the law accordingly, while noting that existing loan and sub-trust arrangements remain operative. This removed a significant compliance burden from trust-and-company structures. It did not remove all risk: Subdivision EA, section 100A, and Part IVA still apply depending on how funds are used.
The 2028 Trust Tax on the Horizon
The bigger structural question is the proposed minimum 30% tax on discretionary trust income from 1 July 2028, announced in the 2026-27 Federal Budget. This is a separate measure from Bendel, and it may reshape whether trust structures and corporate beneficiaries remain as attractive from 2028. Any decision about structure now should factor in what the landscape looks like after that date.
When to Change
The start of a new financial year is the practical moment to make a structural change - a restructure effective from 1 July applies cleanly to the full year, without pro-rating. But changing structure is not free: transferring assets between entities can trigger CGT and stamp duty, and some rollovers are available while others are not. It needs to be planned, not rushed.
How Phan Campbell & Associates Can Help
At Phan Campbell & Associates in Footscray, our combined accounting and legal team advises business owners across Melbourne and Victoria on choosing and changing business structures. We handle the tax analysis - including the Bendel and 2028 implications - and the legal work of setting up or restructuring the entities, in one engagement.
The right structure is not the simplest one. It is the one that fits what your business actually is now - and where it is heading.
Frequently Asked Questions
1. Should I run my business through a trust or a company?
It depends on income, risk, ownership, and plans. A company offers a flat 25% rate and limited liability but no CGT discount. A trust offers flexible distribution and the CGT discount but faces increasing scrutiny and the 2028 tax.
2. How did the Bendel decision affect trust structures?
The High Court held that an unpaid present entitlement to a corporate beneficiary is not, on its own, a Division 7A loan - removing a major compliance burden, though Subdivision EA, s100A, and Part IVA still apply.
3. What is the 2028 trust tax?
A proposed minimum 30% tax on discretionary trust income from 1 July 2028 - a separate measure that may change whether trust structures remain attractive.
4. When is the best time to change my business structure?
The start of a new financial year. Changing structure can trigger CGT and stamp duty, so it needs planning. Book a free consultation with Phan Campbell & Associates.