Persona 05 — Sam, self-employed electrician

Profile

• Age: 41
• Occupation: Sole-trader electrician (now considering moving to a discretionary trust or company)
• Annual business profit: $145,000
• Wife: Em, on $40,000 from part-time admin work
• Kids: 14, 12 (no income)
• Assets: ute (current write-down value $35k), tools (~$22k), small commercial premises (long-term lease)
• Currently structured as: sole trader with ABN

Their universe of policies

• Theme 03 §3.5 — Small-business productivity / Theme 04 §4.4
• Theme 04 §4.4 — Business tax
• Theme 04 §4.3.1 — 30% min tax on discretionary trusts
• Theme 04 §4.1 — Personal income tax

Scenarios

Scenario A — Permanent $20,000 instant asset write-off

• Policy: §4.4 — Permanent $20,000 IAWO from 1 July 2026 for businesses ≤$10M turnover.
• Source: factsheet-backing-small-business.docx.
• Mechanic: Sam buys a $19,500 thermal imaging camera for fault-finding. Under the new regime he can immediately deduct the full $19,500 — vs depreciating over 4-5 years previously. At his marginal rate (~37%), that's an upfront cash benefit of ~$7,200.

Scenario B — He has a bad year and wants to carry losses back

• Policy: §4.4 — permanent two-year loss carry back for all companies with turnover up to $1 billion, from 1 July 2026.
• Source: factsheet-backing-small-business.docx — Coffee Co worked example (Daniel and Eloise's café). Coffee Co buys a $19,000 coffee machine, $19,000 of tables/chairs and $17,000 of outdoor heaters → all immediately deductible under the $20k IAWO → flips into a $15,000 tax loss → carry back to the prior year's tax paid → $3,750 refund ($15,000 × 25%).
• Mechanic for Sam: If Sam incorporates and the company makes a $15,000 loss after a profitable year, the company recovers $3,750 cash the same way. Up to 85,000 companies expected to benefit annually.

Scenario C — Should Sam set up a discretionary trust to split income with Em and the kids?

• Policy: §4.3.1 — 30% min tax on discretionary trusts.
• Source: tax-explainers-minimum-tax-discretionary-trusts.docx.
• Mechanic (using Treasury "Kurt" cameo): Pre-reform, a tradie on $300k via discretionary trust splitting income to 4 family members @ $50k each = ~$42,010 total tax. Same tradie via company paying himself $100k salary + retaining = ~$72,002 total tax.
• Post-reform (1 July 2028): Trust structure pays minimum 30% on undistributed-to-employee income — total tax becomes ~$86,002. Operating through a company is now ~$14k/yr cheaper than a trust at his income level.
• Decision: for income > ~$200k, the company structure beats the trust under the new minimum-tax regime. Add the corporate tax rate of 25% (small business) and franking credits.

Scenario D — Restructuring out of the trust if he had set one up

• Policy: §4.3.1 — Rollover relief available 3 years from 1 July 2027.
• Mechanic: No income tax / CGT consequences if he restructures from trust to company between 1 July 2027 and 30 June 2030. ASBFEO support available from 1 January 2027 to walk small businesses through the choice.

Scenario E — His personal income tax cut

• Policy: §4.1.1, §4.1.2 WATO (WATO is available to sole traders), §4.1.3 instant deduction (also available for employment income).
• Mechanic: Sam's $145k profit attracts the bracket cuts. WATO of $250 applies because he's a sole trader. Treasury table for $145k: ~$3,997 in 2026-27, $4,515 from 2027-28 (up to $4,905 with the full $1,000 instant deduction if he draws a wage from the company).

Bottom-line annual impact

Calculator settings

Open calculator/index.html:

• Sole-trader mode: $145,000 self-employed income, claim $1,000 IAW.
• Toggle the "Discretionary trust split" box ON in the Trust tab to see the pre-reform vs post-reform difference if he had a trust splitting to family.
• Add a $19,500 capex item in the Business tab to see the IAWO cash effect.