How to Pay Yourself From a Company

If you run your business through a company, one rule trips up more owners than any other: the company’s money is not your money. The company is a separate legal person. It earns the profit, it pays tax on that profit, and what is left belongs to the company until you take it out a proper way. Paying yourself is not moving cash between two of your own accounts. It is a transaction between you and a separate entity, and how you structure it decides how much tax you pay.

So start with what happens before you take anything out. The company pays tax on its profit first, at 25 percent if it is a base rate entity (broadly, turnover under 50 million dollars with mostly active income) or 30 percent otherwise. Only then do you choose how the money reaches you. There are 3 clean ways to do it, and one shortcut that quietly builds a tax bill.

1. Salary or wages

This is the most straightforward. You put yourself on the payroll like any other employee. The company claims a deduction for what it pays you, it withholds PAYG and reports through Single Touch Payroll, and it pays super, now 12 percent, on every payday. You then pay tax at your own marginal rate. The appeal is that it is simple, deductible to the company, and it builds your super. The cost is the super and the employer obligations that come with a payroll.

2. Dividends

A dividend works differently. It is paid out of profit the company has already paid tax on, so it carries a franking credit, a credit for that company tax, which flows through to you under the imputation system. There is no super and no PAYG withholding on a dividend. You declare it on your return alongside the franking credit. For most owners the real question is not salary or dividend but the right mix of the two, which is worth working through on your own numbers.

3. A Division 7A complying loan

The company can also lend you money, but only if it is done properly. A Division 7A complying loan needs a written agreement in place before the company’s lodgment day, interest charged at least at the benchmark rate (8.77 percent for the 2026-27 year), repayment over no more than 7 years if unsecured, and a minimum repayment made each year by 30 June. Miss any of those and the loan stops being a loan in the eyes of the tax law.

The shortcut that backfires

Plenty of owners treat the company bank account as their own, moving money across when they need it and planning to sort it out later. The tax law does not wait for you to sort it out. Under Division 7A, money taken out of a private company without one of the structures above can be treated as a deemed dividend, and an unfranked one. That means it is taxed at your marginal rate, up to 47 percent, with no credit for the company tax the profit already carried. You can end up taxed twice on the same dollar. This is the most common and most expensive mistake owner managers make.

None of this is a reason to be nervous about paying yourself. It is a reason to pick the method before you move the money, not after. Set a salary, declare dividends deliberately, and if you borrow from the company, paper it properly. The tax outcome is in your hands as long as you choose the structure on purpose.

Three structured routes out of the company, and the informal shortcut that Division 7A turns into an unfranked dividend.

If you are still weighing whether a company is the right structure at all, that is a separate question worth settling first, because it changes how you get paid. Once the company is in place, HPLedger can run the payroll side of a salary and keep your dividend and loan records tidy, so the paperwork Division 7A depends on actually exists when you need it.

The technical detail

Company tax. Base rate entity rate 25 percent where aggregated turnover is under 50 million dollars and base rate entity passive income is 80 percent or less; otherwise 30 percent. Maximum franking rate equals the company tax rate.

Salary. Deductible to the company under section 8-1 ITAA 1997; subject to PAYG withholding and Single Touch Payroll reporting. Super guarantee is 12 percent, payable each payday under Payday Super from 1 July 2026.

Dividends. Paid from profits; franked under the imputation rules (Division 207 ITAA 1997), passing a franking credit to the shareholder. No super or PAYG withholding applies.

Division 7A loan. Part III ITAA 1936. Complying loan under section 109N requires a written agreement before lodgment day, an interest rate at least at the benchmark (8.77 percent for 2026-27; 8.37 percent for 2025-26), a maximum term of 7 years unsecured or 25 years secured, and a minimum yearly repayment under section 109E by 30 June.

Non-compliance. A non-complying loan or informal drawing is a deemed unfranked dividend taxed at the shareholder’s marginal rate (up to 47 percent with Medicare), capped at the company’s distributable surplus under section 109Y.

Current as at July 2026. General information only, not personal tax advice.