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Reply To: Hi, I am about to open an online business to supplement my income. I currently work full time andI earn close to the threshold of the 30% income tax bracket and I predict that my earnings will pass the earning threshold in my first year of trading. Can you please advise whether I should register as a sole trader or company?

Morena – good question, there are a few things to take into account, and if you don’t decide to go into setting up a company now, you can always do that later. Let me share a couple thoughts:
– company tax rate is 28% while the 30% person income threshold is for income between $48k and $70k, and above this 33%
– GST threshold above which you have to register for GST is $60k
– setting up a company is pretty easy on line, but it does add extra costs when you think about annual returns, accounts, tax returns etc but it does create a separate legal structure which can be good.

What is the ‘easiest’ – would be to just keep being a sole trader while you set this up, and work out if it is going to be a good thing, and what shape it will take, keep your costs down low and just focus on your market. You could argue that 2% is a big difference in terms of the saved tax from personal vs company tax rate – but to have flexibility that is probably a good thing.

Hope that helps. Andy