Income assessed at individual tax rate (advantage if only on a low rate)
Taxpayer is able to obtain the 50% CGT discount
The taxpayer is able to obtain the small business CGT concessions easily;
There are no controlling individual test (unless asset is shares or units)
No requirement to retire when obtaining the retirement exemption
Business losses can be offset against other income, subject to the non-commercial loss rules
Losses can be easily carried forward
Easy to incorporate into a company using CGT rollover relief
Taxpayer can borrow money from, and transfer money to, family members without any tax implications
Business can lend money to family members interest free
The taxpayer can rollover assets to a wholly owned company
Disadvantages
No asset protection so creditors of the business could have access to the sole trader’s personal assets
No income splitting
Income assessed at own tax rate (disadvantage if on a high tax rate)
The taxpayer cannot be an employee and therefore, cannot salary package
The substantiation rules must be complied with for car and travel expenses
There will be tax implications when a partner is admitted
There may be tax implications when the taxpayer dies or divorces
Disclaimer: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in this article is for guidance only and should not be relied upon without obtaining professional advice having regard to your specific circumstances.
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