You cannot change, transfer, or upgrade an existing sole trader ABN into a company ABN. A sole trader ABN belongs to you as an individual. A proprietary limited (Pty Ltd) company is a separate legal entity that requires its own Australian Company Number (ACN), its own ABN, and its own tax and insurance registrations.
If your business has outgrown the sole trader structure, this guide covers the step-by-step process to incorporate, the ASIC costs, the tax traps most blogs skip, and the insurance update that catches most business owners off guard.
TL;DR
- You cannot modify a sole trader ABN into a company ABN. The company is a separate legal entity that needs a new ACN and a new ABN.
- Registering a Pty Ltd company with ASIC costs $611 as a one-off fee, with a $329 annual review fee from the second year onward (2025-26 rates).
- Moving assets from your sole trader to the company can trigger Capital Gains Tax events unless you qualify for small business restructure rollover relief.
- Your sole trader insurance policy does not cover the company. The policy is issued to you as an individual, not to the company entity. Operating under the wrong entity name may mean your insurer does not respond to a claim.
- upcover arranges insurance for companies transitioning from sole trader structures, with instant Certificate of Currency under your new company ABN.
What Changes When You Move from Sole Trader to Company?
The difference is structural. As a sole trader, you and your business are the same legal entity. As a company director, you are managing a separate legal person.
The corporate veil
A Pty Ltd company creates a legal separation between your personal assets and your business liabilities. If the company is sued, your personal home, savings, and car are generally protected (unless you have given personal guarantees or breached director duties under the Corporations Act 2001). As a sole trader, that separation does not exist.
Tax structure
Sole traders pay tax at individual marginal rates, which can reach 45% (plus the 2% Medicare levy) on income above $190,000. A Pty Ltd company classified as a Base Rate Entity (aggregated turnover under $50 million, with 80% or less of assessable income being passive) pays a flat company tax rate of 25%.
The company lodges its own tax return. As director, you pay yourself a salary and the company withholds PAYG tax on that salary. The company must also pay the 12% superannuation guarantee on your salary from the first dollar.
Ongoing compliance
A company must lodge an annual company tax return, maintain ASIC records, pay the $329 annual review fee, keep a registered office address, and appoint at least one director. Failing to pay the annual review fee on time triggers automatic late penalties: $98 if paid within one month of the due date, or $411 if paid after that. The administrative load is higher than a sole trader.
Sole trader vs company at a glance
Sole Trader vs Company at a Glance
Sole Trader vs Company at a Glance
|
Sole Trader |
Pty Ltd Company |
| Legal entity |
You and the business are the same legal person |
Company is a separate legal person |
| Liability |
Unlimited personal liability |
Limited to company assets (unless personal guarantees given) |
| ABN |
Tied to your individual identity |
New ABN tied to the company entity |
| Tax rate |
Individual marginal rates (up to 45% + 2% Medicare levy) |
Flat 25% for Base Rate Entities |
| Tax return |
Business income on your personal return |
Separate company tax return |
| ASIC obligations |
None |
$329 annual review fee, director duties, company records |
| Insurance |
Policy in your personal name |
Policy must be in the company name |
How to Change from Sole Trader to Company Step by Step
Step 1: Register your company with ASIC
Use the Australian Government's Business Registration Service at business.gov.au to register your Pty Ltd company. ASIC will issue your Australian Company Number (ACN). The registration fee is $611 for a standard proprietary limited company (2025-26 financial year). You will need to choose a company name that includes "Pty Ltd" or "Proprietary Limited."
Step 2: Apply for a new company ABN and TFN
Once you have your ACN, apply for a new ABN for the company through the Australian Business Register. The company also needs its own Tax File Number (TFN). You cannot reuse your sole trader ABN or TFN for the company.
For a walkthrough of the ABN application process, see upcover's guide on how to get an ABN in Australia.
Step 3: Set up a separate company bank account
Open a bank account in the company's registered name. Company funds must be kept separate from your personal finances. Mixing personal and company money can create compliance problems and may expose you to personal liability.
Step 4: Transfer your business name and assets
If you trade under a registered business name, you can transfer it from your sole trader ABN to the company ABN through ASIC. Domain names, trademarks, client contracts, and physical assets also need to be formally transferred or novated to the new entity.
Existing contracts do not automatically transfer. You will need to re-sign or novate contracts with your clients and suppliers in the company's name.
Step 5: Register for GST and PAYG under the new ABN
If the company will have annual turnover of $75,000 or more, register for GST under the company ABN. If you are paying yourself a director's salary, register for PAYG withholding. For more on GST obligations, see upcover's guide on GST on invoices and quotes.
Step 6: Cancel your sole trader ABN
Once the company is operational and all assets, contracts, and registrations have been transferred, cancel your sole trader ABN through the Australian Business Register. You should cancel your ABN within 28 days of ceasing to operate as a sole trader. Your final BAS lodgment and any outstanding GST reconciliation follow your normal ATO reporting cycle (quarterly or annually), not the 28-day ABN cancellation window. You can keep your sole trader ABN active if you continue to operate a separate sole trader business alongside the company.
For more on managing multiple ABNs, see upcover's guide on using one ABN for multiple businesses.
The Hidden Tax Traps When Restructuring
Two tax issues catch business owners off guard when moving from sole trader to company.
Capital Gains Tax on asset transfers
When you transfer business assets (vehicles, equipment, goodwill, intellectual property) from yourself as a sole trader to the company, the ATO treats this as a disposal. This can trigger a Capital Gains Tax (CGT) event, meaning you may owe tax on any increase in the value of those assets since you acquired them.
Small businesses may qualify for the Small Business Restructure Rollover under Subdivision 328-G of the ITAA 1997, which allows you to defer the CGT liability when transferring assets to a new structure. Eligibility conditions apply. Confirm with a registered tax agent whether the rollover applies to your situation.
State-based stamp duty
Some states and territories impose stamp duty on the transfer of certain assets (particularly real property and motor vehicles) from a sole trader to a company. The rates and exemptions vary by state. Check with your state revenue office before completing the transfer.
Why Your Sole Trader Insurance Does Not Cover Your Company
This is the step most business owners miss entirely, and it can be the most expensive mistake in the transition.
The insured entity principle
An insurance policy is issued to a specific legal entity. If your public liability or professional indemnity policy was issued to "Jane Smith trading as Smith Cleaning," it covers Jane Smith as an individual sole trader. It does not cover "Smith Cleaning Pty Ltd." These are two different legal entities in the eyes of the law and in the eyes of the insurer.
If a claim is made against the company but your policy is in your sole trader name, the insurer may not respond. The entity on your policy must match the entity operating the business.
The Certificate of Currency mismatch
When you issue a Tax Invoice under your new company name and ABN, procurement teams, principal contractors, and facility managers will cross-match the entity name on that invoice against the entity name on your Certificate of Currency. Many use automated compliance software to run this check. If the entity names do not match precisely, your invoice will be flagged and payments held until you present a valid certificate listing the correct company name. Transitioning your insurance to the company ABN at the same time as your other registrations avoids this gap.
New insurance needs as a company
Moving to a Pty Ltd structure often introduces insurance needs that did not apply as a sole trader:
upcover arranges insurance for companies transitioning from sole trader structures. A Certificate of Currency is issued instantly under your new company ABN on policy confirmation.
How upcover Arranges Insurance for Growing Businesses
upcover is a digital-first insurance broker helping Australian businesses arrange the right insurance as they grow. upcover arranges public liability, professional indemnity, D&O, and business pack insurance for sole traders and companies across Australia, with access to 80+ insurance partners.
- 70,000+ businesses covered across Australia.
- 4.9/5 customer rating.
- Instant Certificate of Currency on policy confirmation.
upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078.
Get a quote through upcover's sole trader insurance page.
FAQ
Can I change my ABN from sole trader to company?
No. A sole trader ABN is linked to you as an individual. A company is a separate legal entity that requires a new ACN from ASIC and a new ABN from the Australian Business Register. You cannot transfer, upgrade, or convert a sole trader ABN into a company ABN.
What happens to my insurance when I change business structure?
Your sole trader insurance policy does not automatically cover the company. The policy is issued to you as an individual, not to the company. You need to arrange a new policy or update your existing cover to reflect the company ABN. If you operate under the wrong entity, the insurer may not respond to a claim.
Can I keep my business name when switching to a company?
Yes. You can transfer a registered business name from your sole trader ABN to your company ABN through ASIC. There may be a small transfer fee. Your company can trade under the same business name.
Do my contracts automatically transfer to the new company?
No. Contracts signed under your sole trader name do not automatically apply to the company. You will need to re-sign or novate each contract in the company's name. Notify clients, suppliers, and other parties of the structure change.
Can I hold both a sole trader ABN and a company ABN at the same time?
Yes. You can operate as a sole trader for some activities and as a company director for others. Each entity has its own ABN, its own tax obligations, and its own insurance requirements. Many business owners keep their sole trader ABN active during the transition period.
How much does it cost to register a company with ASIC?
The standard ASIC registration fee for a proprietary limited company is $611 (2025-26 financial year). There is also a recurring annual review fee of $329. Late payment incurs penalties of $98 within one month or $411 after that.
The information in this article is general in nature and provided for informational purposes only. It does not constitute personal tax, legal, or insurance advice. References to ASIC fees, company tax rates, Capital Gains Tax, stamp duty, and the Corporations Act are based on publicly available information current at the time of writing and may change. Always confirm the current position with ASIC, the Australian Taxation Office, and a registered tax agent or corporate lawyer. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.
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