One Company Doing Everything? Why Australian Directors Should Revisit Their Business Structure Now

Separating trading, assets, employees and IP — and why the new 30 per cent minimum tax on discretionary trusts makes this the right time to act

Most successful businesses start the same way: one company, registered in an afternoon, that does everything. It signs customer contracts, employs staff, owns the vehicles and equipment, holds the brand and software, banks the profits and leases the premises. It is simple, cheap and perfectly adequate — right up until the moment it isn’t.

As a business grows, that single entity quietly accumulates every category of risk and every category of value in one place. When something goes wrong — a tax debt the business cannot clear, a major customer dispute, a workplace claim, a supplier failure — everything the business has built is exposed to that one event. In our advisory work, we see this pattern constantly, and the conversation almost always happens too late: after the ATO debt has built up, or after legal action has commenced, when the options for protecting the business have narrowed dramatically.

Two forces make a structural review particularly urgent right now. The first is the ATO’s return to firm enforcement, with collectable debt climbing to roughly $50 billion in recent years and director penalty notices being issued in volume. The second is the Federal Government’s announcement in the 2026–27 Budget of a 30 per cent minimum tax on discretionary trusts from 1 July 2028 — a measure that rewrites the economics of running a business through a family trust and distributing profits to a “bucket company”. Both are discussed below.

The problem with the single-entity structure

A company is a separate legal person, and limited liability protects shareholders — but it does nothing to protect the company’s own assets from the company’s creditors. If your trading company is sued or wound up over unpaid tax debt, every asset it owns is available to the liquidator and creditors: the plant and equipment, the property, the intellectual property, the goodwill and the retained profits. Years of accumulated value can be consumed by a single trading event.

Directors also face greater personal exposure than many realise. Under the director penalty notice (DPN) regime, directors can become personally liable for a company’s unpaid PAYG withholding, superannuation guarantee charge and GST. If lodgments are significantly overdue, that liability can become “lockdown” liability that cannot be extinguished even if the company is placed into administration or liquidation. Add personal guarantees given to landlords, financiers and suppliers, and the line between company risk and family wealth can be thinner than the structure chart suggests.

The answer, for many established businesses, is to separate the functions of the business into different entities so that risk sits in one place and value sits in another. Such a strategy is always best actioned from the start of any new business venture and for the avoidance of future technical debt.

Separating risk: trading, assets, employees and IP

There is no single correct structure — the right design depends on the business — but a well-planned group commonly separates four functions:

• The trading entity. This company faces customers and suppliers, signs contracts and carries the operational risk. Deliberately, it owns as little as possible. If it is ever sued or fails, the damage is contained to the entity that carries the risk.
• The asset-holding entity. Premises, plant, equipment and vehicles are held in a separate entity and made available to the trading entity under a formal, arm’s-length lease or hire agreement. Creditors of the trading entity generally cannot reach assets it does not own.
• The IP-holding entity. Trade marks, patents, software, systems, data and brand assets are often the most valuable and most portable assets in the group. Held separately and licensed to the trading entity, they survive a trading failure and can be relicensed or sold independently.
• The employment or service entity. Some groups employ staff through a dedicated entity that provides labour and administrative services to the trading business on commercial terms. This can quarantine employment-related claims and simplify a future sale, but it must be genuinely commercial and properly documented — and it does not dilute obligations to employees, whose entitlements, superannuation and Fair Work protections follow them.

Above these entities usually sits a holding company (often with shares ultimately owned by a trust), so that profits can be paid up as dividends and retained away from trading risk, and so the group can be financed, expanded or sold in an orderly way.

Whilst there are proposed changes to trusts incoming from the Federal Government which we discuss later in this article, trusts will still have relevance in a company share ownership structure, especially for the distribution of profits on exit and for asset protection purposes.

Key considerations before you restructure

Restructuring an operating business is not just about registering new companies and moving assets. Done badly, it can trigger tax, breach of contract for lenders and suppliers, or even be unwound by a court. The main issues to work through with your advisers include:

• Timing and creditor protection. Asset protection works prospectively. Transfers made when a company is already insolvent, facing claims or carrying significant tax debt can be attacked as voidable transactions or creditor-defeating dispositions under the Corporations Act, and the anti-phoenixing laws carry serious penalties. A restructure is best done from a position of strength, not distress and in advance with proper strategic planning and advice.
• Capital gains tax. Moving assets between entities is a disposal for CGT purposes, but rollovers can defer the tax — including the small business restructure rollover in Subdivision 328-G (for groups with aggregated turnover under $10 million undertaking a genuine restructure with no change in ultimate economic ownership) and the Division 122 and Division 615 rollovers. From 1 July 2027, the Government’s new expanded rollover relief will also allow restructures out of discretionary trusts with no income tax consequences, including CGT — discussed below.
• Stamp duty and GST. Transfer duty is state-based and varies significantly — transfers of land, and in some states business assets, can attract material duty. GST on asset transfers can often be managed through grouping or the going-concern exemption, but this needs to be planned, not assumed.
• Employees. Moving staff to a new employer engages the transfer-of-business provisions of the Fair Work Act; entitlements such as leave and continuity of service must be dealt with properly. Note that payroll tax grouping provisions mean splitting entities will generally not reduce payroll tax.
• Banks, contracts and the PPSR. Financier consents, security interests, key customer and supplier contracts, leases and licences may all contain change-of-control or assignment clauses. Personal guarantees left in place can quietly undo much of the protection the new structure is meant to provide.
• Substance over form. Intercompany leases, licences and service agreements must be documented on commercial terms and actually followed — invoices raised, payments made, minutes kept. A structure that exists only on a diagram will not withstand scrutiny from the ATO or a liquidator.

Trusts: the new 30 per cent minimum tax changes the equation

For decades the discretionary (family) trust has been a default structure for Australian private businesses — around 350,000 active small businesses operate through one. Its central attraction was flexibility: trust income could be split among family members on lower marginal rates, and profits could be capped at the corporate rate by distributing to a corporate beneficiary, or “bucket company”. In the 2026–27 Budget, the Federal Government announced a measure that dismantles much of that advantage: a 30 per cent minimum tax on discretionary trusts, applying from 1 July 2028.

How the minimum tax will work. The trustee will pay 30 per cent tax on the taxable income of the trust (unless higher rates apply), regardless of how that income is distributed. Trustees will be required to calculate, report and pay the minimum tax and to notify beneficiaries of their entitlements and associated credits. Beneficiaries will still declare their trust income, and individuals and other non-corporate beneficiaries will receive a non-refundable credit for the tax paid by the trustee. The effect is a floor: distributing income to family members on marginal rates below 30 per cent will no longer reduce the overall tax paid on that income, and because the credit is non-refundable, the excess cannot be recovered. Trusts already distributing to beneficiaries taxed at 30 per cent or more will see no overall increase. Trustees receiving franked dividends will be required to apply their franking credits towards the minimum tax.

Who is caught — and who is not. The measure targets discretionary trusts specifically. Fixed and widely held trusts, complying superannuation funds, special disability trusts, deceased estates and charitable trusts are excluded, as are certain income types including primary production income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of testamentary trusts existing at the announcement. The Government estimates around half of discretionary trusts will not be affected in any given year — which means the other half will be, and trading trusts that split income across the family are squarely in scope.

What it means if you run your business through a trust. The core tax benefit of a trading trust — income splitting to lower-taxed family members — is largely switched off from 1 July 2028. Genuine salaries and wages paid to family members who actually work in the business will not attract the minimum tax, but distributions of profit will bear at least 30 per cent. And the long-standing weaknesses of trusts as trading vehicles remain: they provide no simple way to retain earnings (retained trust income is taxed to the trustee at top rates), and they make debt and equity funding harder. The Government’s own Budget cameo makes the comparison plain: a $300,000 small business run through a company (paying the owner a $100,000 salary and retaining the balance at the 25 per cent small business rate) pays $72,002 in total tax, while the same business run through a discretionary trust pays $86,002 once the minimum tax applies. For many trading trusts, moving the business into a company — with access to the 25 per cent rate (aggregated turnover under $50 million, no more than 80 per cent passive income), dividend imputation and genuine retained earnings — will now be the clearly better position. A fixed trust is the alternative flagged by the Government for those who want to keep a trust structure with more certain beneficiary entitlements.

Rollover relief: a limited window. Critically, the Government will provide expanded rollover relief so that restructures out of a discretionary trust into a company or fixed trust have no income tax consequences, including CGT. That relief is available for three years from 1 July 2027 — a defined window that closes. From 1 January 2027 the Australian Small Business and Family Enterprise Ombudsman will help small businesses understand their options, and ASIC will put arrangements in place to support incorporation. Key design details — including the collection mechanism, the treatment of excess franking credits and the scope of the rollover — remain subject to consultation, so the final settings should be confirmed before acting. But the direction is unambiguous, and businesses that use the window deliberately will restructure on far better terms than those that wait.

This measure also lands on top of existing pressure on trust distributions: the ATO’s active enforcement of section 100A against “reimbursement agreement” arrangements, and the long-running Division 7A dispute over unpaid present entitlements to corporate beneficiaries. A trading trust was already a structure under scrutiny; from 1 July 2028 it will, for many businesses, simply be the more expensive option.

Bucket companies: the strategy is being switched off

The bucket company has been the workhorse of trust tax planning: distribute trust profits to a corporate beneficiary, pay tax at 25 or 30 per cent instead of up to 47 per cent, and defer the top-up tax until the money is eventually paid out to shareholders. The minimum tax is expressly designed to end this.

No credits for corporate beneficiaries. Under the announced design, corporate beneficiaries will be assessed on the trust income to which they are entitled without a credit for the tax paid by the trustee. In the Government’s words, this ensures the minimum tax “cannot be avoided by cycling income through a ‘bucket’ company” — and it prevents the trustee’s tax being converted into refundable franking credits. The practical consequence is that, from 1 July 2028, distributing trust profits to a bucket company is expected to attract both the trustee-level minimum tax and corporate tax on the same income. What was a tax-effective strategy becomes a tax-inefficient one.

This is a deliberate target. The Budget papers note that around 80,000 companies received distributions from discretionary trusts in 2022–23, and that 83 per cent of them showed no evidence of business activity — the Government’s conclusion being that they exist primarily for tax purposes. Directors should assume this area will attract compliance attention, not just new law.

If your group uses a bucket company, three things belong on the agenda now. First, model the position: quantify what your current distribution pattern will cost once the minimum tax applies, and what the alternatives — salaries to family members working in the business, restructuring into a company, or a fixed trust — would deliver instead. Second, deal with the past: many bucket companies hold years of unpaid present entitlements and accumulated profits, and Division 7A, franking and shareholder-level tax all need to be managed as part of any exit or wind-down. Third, plan the transition: if the trading operation is moving into a company, the rollover window from 1 July 2027 is the mechanism to do it without triggering income tax, and the sequencing of that move against the 1 July 2028 start date matters.

The window to act is defined — and it is before the pressure arrives

Every option described above is easier, cheaper and safer when it is done early. Rollovers are available when a restructure is genuine and planned; they are not available to rescue value from a company already in distress, and courts and liquidators can and do unwind transfers made in the shadow of insolvency. The trust measure adds a calendar to the argument: consultation is under way now, the rollover relief opens on 1 July 2027 and runs for three years, and the minimum tax starts on 1 July 2028. Businesses that reorganise deliberately, on their own timetable, will do so with full relief available; those that wait risk restructuring under deadline pressure — or paying the minimum tax while they decide.

If your business still runs through the single company you started with — or through a trading trust with a bucket company attached — it is worth asking two simple questions: if our worst trading day happened next month, what would we lose? And from 1 July 2028, what will our structure cost us that it doesn’t cost us today?

Take the next step with Business Tax Debt Help

Business Tax Debt Help works with directors and business owners to design and implement structures that protect what they have built. Our Restructuring and Transformation Diagnosis is a structured review of your current group: we map where your risk and your value sit today, model the impact of the 30 per cent minimum tax on your trust and bucket company arrangements, quantify the tax and duty consequences of realignment, and deliver a practical, sequenced roadmap for separating trading, assets, employees and IP — timed to make full use of the rollover relief window.

If any part of this article felt uncomfortably familiar, that is the signal to act. Contact our team to arrange your Restructuring and Transformation Diagnosis.

This article is general information only and does not take account of your objectives, financial situation or needs. It is not legal, tax or financial advice. The 30 per cent minimum tax on discretionary trusts described in this article is a 2026–27 Budget announcement: key design details remain subject to consultation and the measure has not yet been legislated, so the final settings may differ from those described. Obtain advice specific to your circumstances before restructuring.