Our earlier article on trusts walked through why the trust default has weakened for founders incorporating a new startup, now that a 30% minimum trust tax applies from 1 July 2028. There’s a third option that keeps coming up in founder conversations since the Budget: setting up your own personal holding company – we’ll call it PersonalCo – to hold the shares in your operating company (OpCo).

This article covers how a PersonalCo actually works, the two situations where it genuinely earns its keep, the situations where it doesn’t, what really happens to your tax bill on exit, and the two practical catches that trip founders up once the structure is running.

How a PersonalCo works

A PersonalCo sits between you and OpCo. You own PersonalCo, PersonalCo owns OpCo.

When OpCo pays a franked dividend up to PersonalCo, PersonalCo pays no additional tax – the franking credits offset the company tax on receipt. From there, PersonalCo can either pass the money on to you personally (where you pay top-up tax to your marginal rate) or hold it inside the company.

That gives you two things:

• Retention of pre-tax funds at the company rate. You can leave money inside PersonalCo rather than pushing it through to your top personal marginal rate every year.
• A vehicle for reinvestment. PersonalCo can put retained funds into other assets – property, listed shares, other businesses – without you needing to extract personally first.

Where a PersonalCo genuinely helps

Two scenarios make the case:

1. You plan to retain and redeploy proceeds into other ventures or investments. If your intention is to take dividend income or exit proceeds and put them into other businesses, equity stakes in future ventures, or an investment portfolio, PersonalCo lets you do that at the company level. You’re not extracting to yourself and losing 47% to personal tax before you can redeploy. This is the strongest case for the structure, and it covers both single-founder exits and serial founder patterns.
2. You expect variable personal income going forward. If your post-exit years might include periods of low personal income – time off, a sabbatical, a move into non-founder work – timing your dividend extraction to those low-income years reduces the top-up tax you pay.

Where a PersonalCo doesn’t help

1. You just want to spend the exit proceeds. If your plan is to take the cash and live off it, PersonalCo adds setup and admin cost without saving you any tax.
2. You expect consistently high personal income. If you’re always on the top marginal rate, the timing flexibility is worth much less.
3. Your primary goal is asset protection. PersonalCo does give you some legal separation, but no more than a trust or than holding personally with proper insurance.

The exit maths

This is the part that trips up a lot of founders. Here’s what actually happens on exit through a PersonalCo:

• PersonalCo sells the OpCo shares
• PersonalCo realises a capital gain
• Companies never received the 50% CGT discount, even under the old rules, and they don’t get indexation under the new rules either – both are only available to individuals and trusts
• PersonalCo pays 30% company tax on the full nominal gain
• When PersonalCo distributes to you as a franked dividend, you gross up, pay your marginal rate and credit the company tax already paid
• Net result: you end up paying roughly your marginal rate on the exit gain

Compare that to holding personally under the new rules, where you pay indexation plus the 30% floor – which also lands close to your marginal rate on a gain with a near-zero cost base.

So on the exit itself, holding through a PersonalCo produces a similar total tax outcome to holding personally. PersonalCo doesn’t save you exit tax. What it gives you is control over when those after-tax proceeds hit your personal tax return.

Two things to know about running a PersonalCo

Your PersonalCo will likely be a 30% company, not 25%. To qualify for the 25% base rate entity tax rate, a company needs less than 80% of its assessable income to be passive income. A PersonalCo that does nothing other than hold OpCo shares and receive dividends will fail that 80% test, so it’ll be a 30% company. That matters for any unfranked income PersonalCo earns – interest on cash, unfranked returns from other investments – which gets taxed at 30% rather than 25%. If PersonalCo later runs active business income or trades through other operating subsidiaries, the 25% rate may become available.

You can’t just borrow at will (Division 7A). If you loan money out of PersonalCo to yourself personally rather than declaring a formal dividend, the ATO will treat it as a deemed dividend unless you comply with strict repayment terms – typically a seven-year loan at a benchmark interest rate. PersonalCo isn’t a borrow-at-will vehicle. You either take dividends and pay the top-up tax, or you leave the money inside.

So which structure for your new company?

For a founder incorporating today, the choice is between three options: hold personally, hold through a discretionary trust, or hold through a PersonalCo.

• Hold personally if you plan to spend the exit proceeds and don’t need asset protection. Simplest and cheapest.
• Hold through a discretionary trust if you need asset protection. Setup cost is roughly $1,500 plus ongoing admin.
• Hold through a PersonalCo if you plan to retain and reinvest post-exit proceeds, or you expect variable personal income where timing matters.

These aren’t mutually exclusive. Some founders will benefit from combining a trust for asset protection with a PersonalCo for retention. That’s a more involved conversation, and it’s one to have before you incorporate rather than after.

If you already hold shares in an existing company through a trust, we have a separate piece on what the CGT and trust changes mean for your exit.

This is general information, not advice. Structural decisions at incorporation are difficult to unwind cleanly later, and the right answer depends heavily on your specific situation.