From Sole Trader to Pty Ltd: Why the Uber Ruling Could Reshape Small Business Structures
From Sole Trader to Pty Ltd: Why the Uber Ruling Could Reshape Small Business Structures
By Social Space Blog | Co-authored with Microsoft Copilot
The NSW Court of Appeal’s decision to hit Uber with an $81 million payroll tax bill has sent shockwaves through the gig economy. But its impact won’t stop at rideshare platforms. For thousands of sole traders—from tradies to therapists—this ruling could trigger a quiet exodus toward company structures as a form of legal and financial protection.
⚖️ Why Sole Traders Are Vulnerable
Sole traders operate under their own name or ABN. Their income is taxed at personal rates, which can climb as high as 45% depending on earnings. They also:
Have unlimited personal liability for business debts.
Are exposed to payroll tax audits if their contractor arrangements resemble employment.
Must report all income on their individual tax return, with no separation between personal and business finances.
In light of the Uber ruling, sole traders who subcontract work or operate in grey zones of employment may find themselves liable for payroll tax, even if they never considered themselves employers.
🧱 Why Pty Ltd Companies Offer a Shield
A proprietary limited (Pty Ltd) company is a separate legal entity. That means:
Business income is taxed at the company rate—currently 25% for base rate entities.
Directors and shareholders have limited liability.
The company lodges its own tax return, separate from the individual.
It’s easier to structure payments, contracts, and employment relationships to minimise tax exposure.
For many sole traders, incorporating as a Pty Ltd company becomes a strategic move—not just for growth, but for survival.
💸 Incorporation Doesn’t Guarantee Viability
Here’s the catch: becoming a Pty Ltd company does not guarantee the appropriate remuneration required to service that company. Many small operators—especially those in care, disability support, or community services—already struggle to cover basic costs. Incorporation adds:
Administrative overheads
Accounting and legal fees
Director responsibilities and compliance burdens
Superannuation guarantees for any employees or contractors deemed eligible
Insurance requirements, including public liability, professional indemnity, and workers’ compensation
These obligations aren’t optional—they’re legal requirements. But for sole traders operating on razor-thin margins, they can be financially crippling.
Take the example of a disability support worker operating under the NDIS. As a sole trader, they may earn $50–$60 per hour, but that rate must cover:
Travel time and fuel
Admin and scheduling
Training and compliance
Insurance premiums
Superannuation contributions
Tax obligations
If they incorporate as a Pty Ltd company, they’re now responsible for:
Paying themselves a wage through payroll
Meeting superannuation guarantee obligations
Holding multiple insurances
Lodging company tax returns and maintaining ASIC compliance
Without an increase in NDIS pricing or guaranteed hours, the shift to incorporation can leave them worse off, not better protected. And with the government now cutting back on NDIS spending—including reductions in individual plans, allied health supports, and departmental funding—these costs will only accelerate. Providers are expected to absorb more risk, while participants receive less support. It’s a structural mismatch: the legal framework demands corporate compliance, but the funding model doesn’t support it.
🔄 The Shift Already Underway
Accountants and legal advisers are already reporting a spike in sole traders seeking to restructure. The reasons are clear:
Avoid retrospective payroll tax bills
Protect personal assets from business liabilities
Formalise subcontractor relationships to meet compliance standards
But this shift isn’t without cost. Incorporating means:
Higher compliance and reporting obligations
Director duties and corporate governance requirements
Potential loss of simplicity and autonomy
🛠️ Reform Must Keep Pace
If the government wants to enforce payroll tax on contractor arrangements, it must also:
Provide clear guidance on what constitutes a “relevant contract”
Offer support for small businesses transitioning to company structures
Ensure carers and informal workers aren’t swept up in punitive tax regimes
Otherwise, we risk pushing sole traders into complex structures just to survive—while ignoring the deeper issue: a tax system that hasn’t kept pace with the realities of modern work.
Co-authorship note: This article was co-written with Microsoft Copilot, using collaborative drafting to support ethical attribution and amplify lived experience in public policy critique.
📚 Sources
NSW Court of Appeal ruling on Uber payroll tax: NSW Court of Appeal, Uber B.V. v Chief Commissioner of State Revenue [2024] NSWCA 50
Australian Taxation Office: Business structures – Sole trader vs company
Fair Work Ombudsman: Independent contractors and employees
Australian Securities and Investments Commission (ASIC): Running a company
NDIS Pricing Arrangements and Price Limits 2024–25: NDIS official pricing guide
Australian Government Budget 2025–26: Department of Social Services – NDIS and disability support funding overview
