How do I pay myself from my Pty Ltd company?
Usually through a mix of wages and dividends. Wages run through payroll with PAYG withheld and super paid. Dividends come from after tax profit and can carry franking credits. Taking money any other way can be treated as a loan under Division 7A, with tax consequences. Set the mix with your accountant each year.
Paying yourself a wage
As a director employed by your company, you can be paid a wage through payroll like any employee, with PAYG withheld and super paid on top.
Paying dividends
The company pays tax on its profit, then can pay dividends from what is left. Franking credits pass the company tax already paid through to you, reducing your personal tax.
Avoid the Division 7A trap
Money you take from the company that is not a wage or a dividend can be treated as a loan under Division 7A. Unless it is put under a proper loan agreement and repaid, it may be taxed as an unfranked dividend.
Decide it before 30 June
The best mix depends on your profit, your other income and your plans. Review it with your accountant before the end of the financial year rather than after.
Also asked
- Do I have to pay myself super?
- If you pay yourself a wage as an employee of your company, super guarantee generally applies. Dividends do not attract super.
- Can I take money out whenever I need it?
- You can, but record it properly as a wage, a dividend or a documented loan. Untracked withdrawals are where Division 7A problems start.
- Does this apply to a sole trader?
- No. Sole traders are taxed on the business profit directly and take drawings. Wages and dividends apply to a company.
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