The quick answer
The company starts with nothing. It needs its own registrations, and the business has to be moved into it.
Your sole trader ABN can’t be transferred. It is cancelled once your sole trader obligations are finished.
Moving an asset to the company is a CGT event. A small business restructure roll-over may defer the income tax, but it has conditions, and GST and stamp duty are separate questions.
The harder part: moving everything in the right order, and paying yourself from the company the right way afterwards.
Two businesses for a while, then one
For a period you have two sets of obligations: the sole trader business winding down and the company starting up. The company is a separate entity with its own tax file number, ABN and registrations, and the business you built has to be transferred into it: equipment, stock, work in progress, goodwill, contracts and any staff.
business.gov.au is direct about the part people most often expect to carry over:
“You can’t transfer your sole trader ABN to your new company.”business.gov.au, Change your sole trader business to a company
Each asset that moves has its own tax treatment. The ATO says that transferring an asset to your company is a CGT event, and trading stock that moves across is treated differently from an ordinary sale.
The small business restructure roll-over can defer the income tax on eligible assets, but only for a genuine restructure where the ultimate economic ownership doesn’t change. It doesn’t deal with GST or stamp duty.
Two sole traders, same decision, different first year
Two sole traders each set up a company in the same month. One moves across cleanly. The other ends up with tax on the transfer, two sets of lodgments running at once, and money taken from the company that is treated as income.
The difference comes down to which assets moved and how, whether the roll-over was available and chosen, the order things were done in, and how each one paid themselves once the company was running.
Six questions that decide how the move goes
QUESTION 1
What has to move across?
Equipment, vehicles, stock, work in progress, goodwill, contracts, leases and any staff. Each one is treated differently.
QUESTION 2
Is the roll-over available to you?
It applies to eligible small businesses, for a genuine restructure, where the ultimate economic ownership doesn’t change.
QUESTION 3
What about GST and stamp duty?
They sit outside the income tax roll-over, and depend on how the transfer is done and where you are.
QUESTION 4
What happens to your staff?
The company becomes the employer, and it may take on their accrued leave.
QUESTION 5
When does the sole trader side close?
Your last sole trader return, activity statements and registrations need to be finished before the ABN is cancelled.
QUESTION 6
How will you pay yourself?
Company money isn’t yours. Wages, director’s fees, dividends and loans are each treated differently.
There is no single answer to any of these. Each one depends on your own situation. Working them out is what we do every day.
What getting it wrong can cost
Tax on the transfer, where assets moved without the roll-over being considered.
GST or stamp duty that wasn’t planned for.
Money taken from the company as if it were your own, which Division 7A may treat as income in your hands.
Loose ends on the sole trader side, such as a last activity statement or tax return that was never lodged.
Does this sound like you?
I’ve decided to set up a company.
Someone told me to “just move it into a company”.
I have equipment, a vehicle or stock in my own name.
I have staff, or I’m about to hire.
I set up a company but still trade under my own ABN.
I’m not sure how to pay myself from a company.
I’d rather have the move handled properly.
If even one of these is you, it’s worth a quick conversation. Sorting it out early is almost always easier than fixing it after the ATO gets in touch.
Common questions
Can I keep using my sole trader ABN?
No. Your sole trader ABN can’t be transferred to the company. The company has its own ABN, and your sole trader ABN is cancelled once your obligations under it are finished.
Do all my assets have to go into the company?
Not necessarily. The assets that do move have to be transferred properly, and how that is done affects the tax result. We work out what should move, how and when.
Can I take money out of the company when I need it?
Not the way you could as a sole trader. A company’s money belongs to the company, and taking it out has tax consequences each time. We set up a way of paying yourself that suits your situation.
How much does it cost?
It depends on your situation, so we give you the fee before any work starts. Asking for a quote costs nothing.
