The Hidden Costs of Registering a Pty Ltd Company in Australia
As your business grows, you will inevitably hear this advice at a BBQ or networking event: "Mate, you need to switch to a Company structure. The tax rate is only 25%!"
While the lower tax rate (compared to the top individual rate of 45% + Medicare levy) is attractive, a Pty Ltd company is a complex legal entity. It comes with administrative strings attached that many new directors don't expect.
Before you make the switch, here are 4 hidden costs you need to budget for.
1. The ASIC Annual Review Fee
Unlike a Business Name registration (which costs about $40 for one year), a Pty Ltd Company requires you to pay an annual subscription to the government just to exist.
As of 2026, the ASIC Annual Review fee is approximately $321 (subject to indexation) per year for a proprietary company. If you pay this even one day late, ASIC hits you with an automatic late fee of nearly $100. It is a cost that never goes away as long as your company is open.
2. Increased Accounting & Compliance Fees
As a Sole Trader, your business income is just a section of your personal tax return. It is relatively simple.
A Company is a separate legal person. This means:
- It needs its own separate Company Tax Return.
- It requires formal Financial Statements (Balance Sheet and P&L) prepared in accordance with accounting standards.
- You (the director) still need to lodge your own Individual Tax Return as well.
Because the workload doubles, you can generally expect your annual accounting fees to increase significantly compared to what you paid as a sole trader.
3. Workers' Compensation (WorkCover)
This is the "gotcha" that catches many sole traders out. As a sole trader, you generally cannot cover yourself under WorkCover; you need personal Income Protection insurance.
However, when you incorporate, you become an employee of your own company. In many states (like Victoria and NSW), if your company pays you wages exceeding a certain threshold (or if you employ others), you become liable to pay WorkCover premiums on your own salary. This can add thousands to your annual overheads depending on your industry risk rating.
4. The "Trapped Money" Problem (Division 7A)
This isn't a direct "fee," but it is a massive financial risk. As a sole trader, the money in the business bank account is yours. You can spend it on groceries, a holiday, or a mortgage.
If you take money out without declaring it as a wage (and paying tax on it) or a formal dividend, the ATO classifies it as a Division 7A loan. You will be forced to pay it back to the company with interest, or pay tax on the full amount at unfranked rates. Managing this compliance adds layer of complexity to your bookkeeping.
Is the tax saving worth the cost?
Usually, a company becomes viable when your profit exceeds $120,000 per year. But every business is different.
We can run a "Structure Simulation" for you—calculating exactly how much tax you would save vs. the extra costs—so you can make an informed choice.
Book a Structure ConsultationSummary
Registering a company is a great milestone for a growing business, providing asset protection and tax planning opportunities. But it isn't "set and forget." Make sure you understand the obligations before you sign the papers.