The important distinction between business structures
You built the business. You did the work. You're owed something for it.
But “pay yourself” actually means something quite different depending on how your business is structured.
The short answer
A sole trader or partner takes drawings — simply transferring money from the business to themselves, taxed as part of their overall business profit at their personal marginal rate. A company director has more options — salary, dividends, or a combination — each with different tax and superannuation consequences. The right method, and amount, is dictated first by your structure, and then by your specific tax and cash-flow position.
Sole trader and partnership — drawings
As a sole trader, you and the business are the same legal entity, so there's no formal wage. You simply transfer money from the business account to yourself — this is called a drawing. It isn't a business expense, and it isn't separately taxed as income at the time you take it; instead, you're taxed on the business's entire net profit for the year, regardless of how much you actually drew out.
Partners work similarly, taking drawings against their agreed share of partnership profit, generally set out in a partnership agreement.
Company — salary, dividends, or both
| Method | How it works | Key implication |
|---|---|---|
| Salary / wages | You're an employee of your own company, paid through payroll | Tax-deductible to the company; PAYG withholding applies; superannuation guarantee (12%) is compulsory |
| Dividends | A distribution of the company's after-tax profit to shareholders | Not a company expense; may carry franking credits reflecting tax the company already paid, reducing your personal tax on the dividend |
| Director's loan | Funds drawn that are intended to be repaid or formally documented | Must be properly documented and reconciled — informal, undocumented amounts can create real complications |
Many company directors use a combination — a modest base salary to cover living costs and keep superannuation flowing, topped up with dividends once profit and franking credits allow. The right mix depends on your cash-flow needs, the company's profit, and your personal tax position — genuinely worth a proper conversation rather than guesswork.
A common thread across every structure
Keep business and personal finances separate, so drawings, salary or dividends are clearly identifiable transactions, not just unexplained withdrawals.
Set aside money for the tax obligation that follows — sole trader drawings and company dividends both create a personal tax liability that needs planning for.
Record every payment to yourself properly and consistently — whichever method applies to your structure.
Base what you pay yourself on what the business can genuinely sustain, not just what you'd like to take — a cash-flow forecast is a more reliable guide than optimism.
A quick self-check
Do I know which method actually applies to my structure — drawings, salary, dividends, or a mix?
Am I setting aside tax on what I pay myself, separate from day-to-day business cash?
If I'm a company director, is any director's loan balance properly documented and reconciled?
Is what I'm paying myself sustainable based on the business's actual, forecast cash position — not just this month's balance?
When should you get professional help?
you're a company director deciding between salary, dividends or a mix, and want the tax implications modelled properly;
you have an informal director's loan balance that's grown without documentation;
you're setting up regular drawings or salary for the first time and want it structured correctly from the start; or
you want confidence that what you're paying yourself is genuinely sustainable, not just what's currently sitting in the account.
Continue learning
→ Sole Trader vs Company — Which Business Structure Is Right for Me?
→ I Paid a Business Expense Personally — How Should It Be Recorded?
→ Is My Business Actually Profitable?
SKC Accounting | Knowledge Centre | Knowledge Guide 029
Last reviewed: August 2026
General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.