How to pay yourself as a business owner

Owners are usually the last people their business pays. Staff, suppliers, landlord and the ATO all come first — which is right in a crisis, but a poor habit in normal trading. A business that can’t pay its owner a regular, fair amount isn’t as profitable as it looks. And an owner with an unpredictable income makes poorer decisions, at work and at home.

Here’s how paying yourself works in each structure, and how to set an amount the business can keep up.

How does a sole trader pay themselves?

As a sole trader, you and the business are the same legal person. There’s no separate “wage”:

• Money you take out is a drawing. It’s not a business expense and not a tax deduction.
• You’re taxed on the business’s profit, not on what you draw. Draw less than the profit and you still pay tax on the full profit; draw more and you’re eating into capital.
• Tax is paid through your individual return, often with PAYG instalments during the year. See our explainer on PAYG instalments.
• Super for yourself is voluntary, though worth planning for.

Partnerships work similarly: each partner takes drawings and is taxed on their share of the partnership’s profit.

Whatever structure you use, write the arrangement down: how much, how often, and when you’ll review it. A one-page note shared with your accountant makes tax time simpler and keeps the business and household budgets on the same page. It also gives you a clear baseline to measure against as the business grows, so a pay rise for the owner becomes a planned decision rather than a raid on the bank account in a good month.

How does a company owner pay themselves?

A company is a separate legal entity. Its money isn’t yours until it’s paid to you in a recognised way:

Method	How it works	Points to know
Wage	Paid through payroll to you as an employee	PAYG withholding, reported via STP; super guarantee (12%) generally applies and goes with each pay run under Payday Super
Dividends	Distribution of after-tax profit to shareholders	Often franked; must be properly declared
Director’s fees	Paid for the role of director	Treated similarly to wages for tax
Loans	Company lends money to you	Must be documented; tax rules apply — your accountant will explain

Many owners combine a regular wage for the work they do with dividends when profits allow. The right mix depends on your personal tax position, the company’s profit and plans for reinvestment — a conversation to have with your accountant. Our comparison of sole trader vs company covers the broader differences.

How much should you pay yourself?

Work through three numbers.

1. What you need. Your essential personal costs — housing, food, transport, insurance, family commitments — after personal tax.

2. What the business can sustain. Look at average monthly profit (before your pay) over the last six to twelve months, then subtract:

• tax on that profit (see how much to set aside for tax);
• a contribution to your cash buffer;
• planned reinvestment — equipment, stock, marketing.

What’s left is a sustainable owner’s pay.

3. What your job is worth. What would you pay a manager to do what you do? If the sustainable figure is far below this, the business may be under-priced — see how to price your services.

Illustrative example. A sole-trader electrician averages $14,500 a month profit before drawings. Setting aside about 30% for tax leaves $10,150; $1,000 to the buffer and $800 for tools and vehicle replacement leave about $8,350. A regular fortnightly drawing of around $3,850 is sustainable, with any surplus reviewed quarterly. The figures are illustrative only — your accountant can help set the tax percentage for your situation.

Halfway to a steady owner’s pay but short on the buffer that makes it possible? See what support you might qualify for — enquiring doesn’t touch your credit file.

How do you keep your pay steady when income isn’t?

• Pay a fixed amount on a schedule — weekly, fortnightly or monthly — rather than taking lumps when the account looks full.
• Use a buffer. In strong months, the surplus stays in the business; in slow months, the buffer keeps your pay steady.
• Review quarterly. If profit has risen consistently, lift your pay. If it has fallen, adjust before the buffer runs out.
• Put it in the forecast. Your pay should be a line in your 13-week cash-flow forecast, just like rent.

Why does owner’s pay matter to the rest of the business?

Because leaving it out distorts every other number:

• Pricing that doesn’t include your wage undercharges for your time.
• Break-even without your wage makes the business look safer than it is — see our break-even guide.
• Valuation — buyers deduct a fair owner’s wage before valuing profit.
• Borrowing — lenders look at whether the business and its owners can comfortably service commitments. A realistic, regular owner’s pay is part of that story.

What are the common mistakes?

• Taking money from a company account whenever you need it, without a method.
• Drawing the whole bank balance in a good month, leaving nothing for BAS.
• Paying yourself nothing for months while telling yourself the business is profitable.
• Forgetting your own super entirely.
• Never reviewing the amount as the business grows.

What about partnerships and trusts?

Partnerships. Each partner takes drawings, and the partnership’s net income is split according to the partnership agreement. Each partner then pays tax on their share through their own return. A written agreement covering drawings, profit shares and what happens when a partner leaves avoids a great deal of friction.

Trusts. A trading trust distributes income to beneficiaries, usually according to a trustee resolution made by 30 June each year. Beneficiaries pay tax on what’s distributed to them. If you work in the business, you might also be paid a wage through the trust’s payroll. Trust arrangements need careful advice — the right approach depends on the family and business circumstances.

In every structure, the same discipline applies: a planned, regular amount rather than whatever’s left over.

What if the business can’t afford to pay you yet?

It happens — in the first year, after a setback or during a heavy growth phase. If that’s you:

• Set a date by which the business must be paying you at least a minimum amount, and plan backwards from it.
• Look at pricing first. A business that can’t pay its owner is often under-priced. Our price-rise calculator shows how much room you have.
• Check your break-even including your wage. If the business only breaks even when you work for free, the numbers need to change.
• Protect your household buffer as carefully as the business one.

Working unpaid for a short, planned period is a choice many founders make. Working unpaid indefinitely is a signal that something in the model needs fixing.

A steady owner’s pay needs a steady business

The foundation of a reliable owner’s pay is predictable cash flow and a buffer to absorb the bumps. Sometimes that buffer needs a head start — particularly after a growth push, a slow season or a large tax bill.

We consider trading businesses for unsecured and line-of-credit facilities typically from $5,000 to $500,000, and property-secured loans from $20,000 to $5,000,000, for business purposes. Your enquiry isn’t a credit check, it isn’t shared with a panel of other lenders, and a real person calls to talk through your situation. Please fill in the form accurately — structure, turnover and what the funding is for — so we can match you properly first time.

See if your business qualifies →