You built the business, the money is in the account, and you want some of it. The question is how to take it out without creating a tax bill or a compliance problem later. The answer depends almost entirely on your business structure.
This guide covers drawings for sole traders, wages and directors’ fees from a company, dividends and franking, Division 7A loans, and trust distributions, for the 2025-26 and 2026-27 income years. Rates and rules were checked against ATO guidance on using business money, ATO super and company tax pages on 7 October 2026.
It is for sole traders, partners and company owners who want a clear picture before talking to their accountant. If you are thinking about changing structure, read our sole trader to company guide as well.
Key takeaways
- Sole traders and partners take drawings. They are not deductible and you pay tax on the whole business profit.
- Company owners can take a salary, directors’ fees, dividends or a complying loan. Taking cash with no paperwork can trigger Division 7A.
- Salary and directors’ fees attract PAYG withholding and 12% super guarantee. From 1 July 2026, super must reach the fund within 7 business days of payday.
- A base rate entity pays 25% company tax and can frank dividends at 25%.
- Division 7A benchmark interest rate: 8.37% for 2025-26 and 8.77% for 2026-27.
Paying yourself at a glance
| Structure | How you get paid | Deductible to business? | PAYG withholding? | Super guarantee? |
|---|---|---|---|---|
| Sole trader | Drawings | No | No (you may pay PAYG instalments) | No, voluntary only |
| Partnership | Drawings against your share of profit | No | No | No, voluntary only |
| Company | Salary or directors’ fees | Yes, if PAYG and super obligations are met | Yes | Generally yes |
| Company | Dividends | No | No | No |
| Trust | Distributions of trust net income | No | No | No |
Source: ATO business structures key tax obligations, ATO using business money for private purposes, ATO super for sole traders, checked 7 October 2026.
How do sole traders and partners pay themselves?
As a sole trader, you and the business are the same taxpayer. You cannot employ yourself, so the money you move to your personal account is a drawing. The ATO is clear that you cannot claim a deduction for money or assets you take from the business for personal use.
You pay tax on the net profit of the business at your personal resident tax rates, regardless of how much you drew. Draw $40,000 from a business that made $90,000 profit and you are still taxed on $90,000. Partners work the same way, on their share of partnership net income.
There is no PAYG withholding on drawings, but you may be required to pay PAYG instalments towards your tax. Sole traders and partners do not have to pay super guarantee for themselves, though they can make personal contributions.
Keep a separate business bank account and code transfers to an owner’s drawings account in software such as Xero, QuickBooks or MYOB. If you are unsure which number belongs to which entity, our ABN vs TFN guide explains it.
How do company owners pay themselves?
A company is a separate legal entity. Its money is not your money, even if you own every share. You have four main ways to get money out.
Salary or wages
You can be an employee of your own company. The salary is deductible to the company if it meets its PAYG withholding and super obligations. The company withholds tax, reports through Single Touch Payroll and pays super guarantee at 12%.
Directors’ fees
Fees paid for your role as a director are assessable income to you and are also subject to PAYG withholding. The ATO lists company directors among those generally eligible for super guarantee. Our directors’ fees guide covers resolutions and reporting in more detail.
Dividends
Dividends are a distribution of profit, not an expense, so the company cannot deduct them. A company that is a base rate entity (aggregated turnover under $50 million and no more than 80% base rate entity passive income) pays 25% tax and can frank dividends at 25%. You include the dividend and the franking credit in your return and receive the credit as an offset.
Loans and Division 7A
Taking money out without a payslip or dividend is treated as a loan. Under Division 7A, if it is not repaid or put on a complying loan agreement before the company’s lodgment day, it can be treated as an unfranked dividend. Our Division 7A explainer goes deeper.
| Division 7A complying loan | Requirement |
|---|---|
| Agreement | In writing before the company’s lodgment day |
| Interest rate | At least the benchmark rate: 8.37% (2025-26), 8.77% (2026-27) |
| Maximum term | 7 years unsecured, 25 years if secured by a registered mortgage over real property worth at least 110% of the loan |
| Repayments | Minimum yearly repayments from the year after the loan is made |
What do PAYG, super and Payday Super mean for owner-directors?
Once you pay yourself a salary or directors’ fees, the company has the same obligations as for any employee:
- register for PAYG withholding and withhold tax from each pay
- report through Single Touch Payroll. Small employers can use concessional options for closely held payees such as directors and family members, including quarterly reporting
- pay super guarantee at 12% of ordinary time earnings for 2025-26 and 2026-27
From 1 July 2026, Payday Super requires super guarantee to be received by the fund within 7 business days after payday, rather than quarterly. If you pay yourself monthly, super now goes monthly too. See our Payday Super guide for the transition details. A payroll service can take this off your plate.
How do trust distributions work?
A trading trust does not pay wages to beneficiaries in their capacity as beneficiaries. Instead, the trustee resolves how the trust’s net income is distributed. The ATO says the trustee should advise and document each beneficiary’s share, beneficiaries report it in their own returns, and the trust cannot deduct distributions.
Loans from a trust to beneficiaries, or distributions that end up benefiting someone else, can raise section 100A issues. Our family trust guide covers the basics.
Worked example: salary plus a franked dividend in 2026-27
Priya owns 100% of a Pty Ltd company that is a base rate entity. Before paying her, the company’s profit is $150,000.
Salary: $80,000, plus 12% super of $9,600. Total cost $89,600, deductible to the company.
Company tax: $150,000 – $89,600 = $60,400 taxable profit. 25% tax = $15,100. After-tax profit = $45,300.
Dividend: the company pays a $30,000 fully franked dividend. Franking credit = $30,000 x 25/75 = $10,000. The remaining $15,300 stays in the company.
Priya’s tax: taxable income = $80,000 + $30,000 + $10,000 = $120,000. Tax = $4,020 + 30% x ($120,000 – $45,000) = $4,020 + $22,500 = $26,520. Medicare levy 2% = $2,400. Total $28,920, less the $10,000 franking credit = $18,920.
Cash in hand: $80,000 + $30,000 – $18,920 = $91,080, plus $9,600 in super. This ignores other offsets and income, and PAYG withheld from the salary counts towards the $18,920.
Rule of thumb: Decide how you will be paid before you take the money. Every dollar out of a company should be a payslip, a declared dividend or a written complying loan, never just a bank transfer.
Common mistakes when paying yourself
- Treating company money as your own: transfers with no paperwork can become Division 7A deemed dividends.
- Forgetting super on your own salary: directors are generally eligible for super guarantee, and from 1 July 2026 it is due with each pay.
- Declaring dividends without the profits to back them: check the accounts and minute the decision first.
- Thinking drawings reduce tax: a sole trader is taxed on profit, not on what they withdraw.
- Missing the lodgment day for loans: the complying loan agreement must be in place before the company lodges or the due date, whichever is earlier.
FAQ about paying yourself as a business owner
Can a sole trader pay themselves a wage?
No. A sole trader and the business are the same taxpayer, so money you take out is a drawing, not a wage. Drawings are not deductible and are not taxed separately. You pay tax on the net profit of the business at your personal rates, whether you withdraw all of it, some of it or none of it.
Do I have to pay super on my own director’s salary?
Generally yes. The ATO lists company directors among the people who are usually eligible for super guarantee. The rate is 12% of ordinary time earnings. From 1 July 2026, under Payday Super, the contribution has to reach your fund within 7 business days after each payday. Dividends do not attract super guarantee.
Are dividends from my own company tax-free?
No. Dividends are assessable income in your personal return. If they are franked, you include the franking credit in your income and then receive it as a tax offset, which recognises the tax the company has already paid. For a base rate entity the franking rate is 25%, so a $75 fully franked dividend carries a $25 credit.
What happens if I take money out of my company without a payslip or dividend?
If it is not repaid or put on a complying loan agreement before the company’s lodgment day, Division 7A can treat it as an unfranked dividend in your hands. A complying agreement needs to be in writing, charge at least the benchmark interest rate, which is 8.77% for 2026-27, and run no longer than 7 years unsecured.
Which is better, salary or dividends?
There is no single answer. Salary is deductible to the company and builds super, but attracts PAYG withholding and super guarantee. Dividends come from after-tax profit and carry franking credits, but do not build super. The right mix depends on your other income, cash needs, retirement plans and the company’s profit, so model both before deciding.
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Nanak Accountants can set up the right mix of salary, dividends and loans for your structure, run your payroll and keep your minutes in order through our company secretarial services. Call 1300 626 258, visit nanakaccountants.com.au or book a free 15-minute consultation. Compare cloud tools such as Xero with your adviser before you choose.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO pages on business structures, using business money for private purposes, super guarantee, Payday Super, company tax rates, Division 7A and resident tax rates on 7 October 2026. Rates and thresholds change, so confirm the current position before acting.
