You can pay yourself from your company through salary or wages, franked dividends, a complying Division 7A loan, or trust distributions where a trust owns the company. Most owners use a combination. Salary is tax deductible to the company and carries super and PAYG withholding, while dividends pass on franking credits for tax the company has already paid. The best mix depends on your marginal rate against the company rate. One option owners ask about constantly is borrowing from the company to fund a home loan offset account, which has its own Division 7A timing rules. Once the money is in your hands, where you park it changes the tax outcome.
Once your business runs through a company, the money in the company bank account is not yours to spend. It belongs to a separate legal entity, and how you move it into your own hands decides how much tax you pay and whether you stay on the right side of the Australian Taxation Office. Do it well and you can smooth your income, use franking credits and keep your overall rate down. Do it carelessly and you can trigger a Division 7A deemed dividend that taxes the same money twice. Mina Baselyous, a Chartered Tax Advisor (CTA), CPA and Registered Tax Agent, structures owner remuneration for established Melbourne businesses. This guide walks through every option, the trade offs, and how to combine them tax effectively.
Salary and wages: deductible to the company, taxed to you
Paying yourself a salary or director’s wage is the simplest option. The company claims a tax deduction for the wage, so it reduces company profit, but you pay tax at your personal marginal rate, the company must withhold PAYG tax and remit it, and superannuation guarantee applies on top. It is clean and predictable, and it builds your super, but it offers no rate advantage once your income is high.
The numbers drive the decision. The company tax rate is 25 percent for a base rate entity, a company with aggregated turnover under $50 million and no more than 80 percent passive income, or 30 percent otherwise for the 2025-26 year, per the ATO company tax rates. Your top personal marginal rate is 47 percent including the Medicare levy on income above $190,000. A salary is fully deductible, but every dollar taken as wage above the middle brackets is taxed far higher than it would be if left in the company. Superannuation guarantee is also compulsory on your ordinary earnings at 12 percent from 1 July 2025, per the ATO super guarantee rate, which is a genuine cost but also a concessionally taxed way to build wealth.
Dividends and franking credits: sharing the tax the company already paid
Dividends are paid to you as a shareholder out of the company’s after tax profits. Because the company has already paid tax on those profits, it can attach franking credits to the dividend, and you receive a credit for that tax under the imputation system. You are taxed on the grossed up dividend but offset the franking credit against your bill, so the profit is not taxed twice.
Under the ATO rules on dividend imputation, you include both the dividend and the attached franking credit in your assessable income, then claim a tax offset equal to the credit. If your marginal rate is below the company rate, the excess franking credit can be refunded; if it is above, you top up the difference. Unlike a salary, a dividend is not deductible to the company and carries no PAYG withholding or super, so it is a different lever entirely. How and to whom dividends can be paid also depends on your share structure and classes of shares, which is why the share register is worth getting right early.
Not sure whether to pay yourself a salary, dividends, or both?
At Pinnacle, we model owner remuneration so you draw what you need at the lowest overall tax rate, without tripping the Division 7A rules. Book a consultation with Mina to map out the right mix for your situation.
Book a ConsultationDivision 7A: the trap of just taking the money
The most expensive way to pay yourself is to simply transfer company money to your personal account and sort it out later. If a private company lends money to a shareholder or associate and it is not repaid or put on a complying loan agreement by the company’s lodgement day, Division 7A treats it as an unfranked deemed dividend, taxable to you in full with no franking credit. It is the single most common structuring mistake we see.
The fix is to formalise the loan. Under the ATO rules on Division 7A, a complying loan needs a written agreement, interest charged at least at the ATO benchmark interest rate, a maximum term of seven years unsecured (or 25 years if properly secured over real property), and minimum yearly repayments. As Mina Baselyous (CPA, CTA) puts it, Division 7A does not stop you accessing your company’s money, it just insists you do it as a real loan, a real wage or a real dividend rather than pretending the question does not exist. For a fuller treatment, see our guide to what Division 7A is and how it works.
Trust distributions when a trust owns your company
If a family trust owns your trading company, or the trust runs the business and distributes profit to a company, you gain another lever. A discretionary trust can distribute income to a bucket company, capping the tax on retained profit at the company rate of 25 or 30 percent rather than your top marginal rate, and the money can later be paid to you as a franked dividend. This is a structuring decision, not a year end afterthought.
The classic arrangement pairs a trust with a bucket company to hold profits you do not need to live on, taxed at the company rate, and released to you as franked dividends in later, lower income years. Where a company is held inside a trust, the interaction of franking credits, the holding period rules and who can use the credits gets technical, as we explain in our post on a company held in a family trust. Used well, this is one of the most powerful ways to control the timing and rate of the tax you personally pay.
Drawings and the shareholder loan account
Drawings are simply money you take from the company during the year before it is classified as wage, dividend or loan. They are not a separate tax free method of paying yourself: every drawing sits in your shareholder loan account and must eventually be squared off as salary, a franked dividend or a complying Division 7A loan. Left unreconciled, drawings are exactly what triggers a deemed dividend.
In our experience working with Melbourne business owners, the loan account is where good intentions unravel. Owners draw what they need through the year, then discover at tax time that the balance has to be dealt with. The discipline is to decide the mix deliberately and clear the loan account each year, not to let it drift. This is bread and butter work for a proactive accountant, and one of the reasons a tax planning engagement pays for itself.
How to combine them to manage your effective tax rate
The tax effective answer is almost never one method. It is a deliberate blend: a salary up to the point where your marginal rate is still reasonable, franked dividends to pass on company tax already paid, retained profit taxed at the company rate where you do not need the cash, and a bucket company or trust to hold surplus. The goal is to smooth income across years and keep your overall effective rate down.
The right blend is personal. It depends on how much you need to live on, your other income, your marginal rate this year versus next, your super position and whether a trust sits in the structure. In practice we model several combinations and choose the one with the lowest lifetime tax, not just the lowest tax this June. Getting this right, year after year, is what separates a compliance accountant from a proactive advisor, and it is the kind of forward planning a business owner should expect from their business structure.
Frequently Asked Questions
What is the most tax effective way to pay yourself from a company?
There is no single answer; the most tax effective approach is usually a blend of a modest salary, franked dividends and retained profit taxed at the company rate. The right mix depends on your marginal rate versus the 25 or 30 percent company rate, your cash needs, and whether a trust or bucket company sits in your structure.
Should I pay myself a salary or dividends from my company?
Both have a place. A salary is deductible to the company, builds super and is predictable, but is taxed at your marginal rate with PAYG withholding. Dividends are not deductible but carry franking credits for tax the company already paid. Most owners use a combination, and the optimal split changes with your income each year.
What happens if I just take money out of my company?
If you take company money without treating it as a wage or dividend, it is a loan to a shareholder. Unless it is repaid or placed on a complying Division 7A loan agreement by the company’s lodgement day, the ATO treats it as an unfranked deemed dividend, fully taxable to you with no franking credit. Formalising the loan avoids this.
Do I have to pay myself super from my own company?
If you are an employee or director paid a wage, superannuation guarantee generally applies on your ordinary earnings at 12 percent from 1 July 2025. If you pay yourself only through dividends or trust distributions, super guarantee does not apply, though many owners still contribute voluntarily because super is a concessionally taxed way to build retirement wealth.
How does a bucket company help me pay myself?
A bucket company receives trust distributions and caps the tax on profit you do not need to draw at the company rate of 25 or 30 percent, rather than your top marginal rate of up to 47 percent. That profit can later be paid to you as a franked dividend in a lower income year, giving you control over timing and rate.
Can I pay myself a director’s fee instead of a salary?
Yes. A director’s fee is a form of remuneration that is deductible to the company and taxed to you, with PAYG withholding and, in most cases, superannuation guarantee applying. It is treated much like a salary for tax purposes. The choice between a fee, a salary and dividends should be made deliberately as part of your remuneration plan.
General Advice Disclaimer: The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. It has been prepared without taking into account your personal objectives, financial situation, or needs. Before acting on anything in this article, consider its appropriateness to your circumstances and seek advice from a registered tax adviser or CPA. Liability limited by a scheme approved under Professional Standards Legislation.
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