How to pay yourself as a business owner in Australia

Published Friday 7 November 2025

Table of contents

• Separate your business and personal finances
• How to pay yourself as a sole trader or as a company
• How much to pay yourself
• Set up your payment system
• Tax obligations and timing
• Record keeping and compliance
• Superannuation considerations
• Typical business owner salary or pay
• How to pay yourself fairly as a business owner
• Make paying yourself easier with Xero
• FAQs on paying yourself as a business owner

Key takeaways

• Separate your business and personal finances by opening a dedicated business bank account to simplify bookkeeping, tax preparation, and cash flow tracking.

• Choose your payment method based on your business structure—sole traders withdraw cash directly and pay tax on total business profit, while company directors can pay themselves through salary, dividends, or a combination of both for potential tax advantages.

• Set aside 25-30% of your withdrawals in a separate account to cover tax obligations, and maintain an emergency fund of 30-90 days of operating expenses before taking personal payments.

• Establish regular, consistent payments that cover your essential living expenses while leaving sufficient cash in the business for operations, growth investments, and unexpected costs.

Separate your business and personal finances

Open a separate bank account for your business. This helps you track business income and expenses clearly. Keeping your finances separate makes bookkeeping and tax time easier.

How to pay yourself as a sole trader or as a company

Your business structure determines both how you can legally pay yourself and how that payment gets taxed.

If you have not registered a business structure, you are a sole trader by default. Companies, partnerships and trusts have different payment methods and tax rules.

How to pay yourself as a sole trader or partnership

Sole traders and partnerships pay themselves by withdrawing cash directly from business accounts. Here's how it works:

• Treat all withdrawals as part of your taxable profit
• Pay tax on your total business profit at the end of the financial year
• Set aside 25–30% of your withdrawals in a separate account for your tax bill

How to pay yourself as a company

If you own a company, you can pay yourself a salary, dividends, or a mix of both.

Salary payments:

• Works like employment: Regular pay with tax deducted
• Business expense: Reduces company tax liability
• Personal income tax: You pay standard income tax rates

Dividend payments:

• Paid from profits: Only available if the company makes profit
• Tax advantages: Often lower tax rates than salary
• Common strategy: Small salary topped up with dividends

Get tax advice

Paying yourself a salary as a company director involves more administration and costs. Speak to an accountant or tax professional to find the best option for you.

How much to pay yourself

Payment amount depends on balancing your personal living costs with your business cash flow needs.

The key question: How much can you take while supporting your business operations and growth?

What the business needs

Business cash requirements include three essential areas:

Operating expenses:

• Monthly bills, supplier payments, and loan repayments
• Business tax obligations
• Action: Track upcoming expenses to avoid cash shortfalls

Emergency fund:

• 30-90 days of operating expenses set aside
• Purpose: Covers revenue dips or unexpected costs

Growth investment:

• Equipment upgrades, marketing campaigns, and new hires
• Rule: Only invest surplus cash after covering essentials

What the household needs

Personal financial needs cover your household essentials:

• Living expenses: Rent, groceries, utilities, and transport
• Debt repayments: Mortgage, credit cards, and personal loans
• Insurance: Health, income protection, and business insurance
• Retirement savings: Super contributions you now manage yourself

Finding a balance

You may need to adjust both your personal and business budgets, especially when your business is new.

Set up your payment system

Once you know your structure and how much you need, it's time to make it official. If you are a sole trader, set up a recurring automatic transfer from your business account to your personal account. If you are a company director, run payroll as you would for any employee.

This processes your salary with tax withheld and superannuation paid. From 1 July 2026, employers must pay superannuation at the same time as salaries.

Tax obligations and timing

How you pay yourself directly impacts your tax obligations.

• For sole traders and partnerships: You pay income tax on the total profit of the business, not just the amount you withdraw. It's wise to regularly set aside a portion of your earnings to cover your income tax and GST obligations.
• For companies: The company pays tax on its profits, and you pay income tax on the salary you receive. If you're registered for PAYG withholding, the company will withhold tax from your salary and send it to the ATO on your behalf.

Record keeping and compliance

Keep clear records. If you are a sole trader, track all money you take out as drawings. If you run a company, issue payslips for salaries and keep detailed payroll records. This helps you stay compliant with the Australian Taxation Office (ATO) and gives you a clear view of your business finances.

Superannuation considerations

Planning for retirement is just as important when you're the boss. If you're a sole trader, you're responsible for making your own super contributions. If you're a director of a company and receive a salary, the company is generally required to pay super guarantee contributions on your behalf, with the rate set to increase from 11.5 per cent to 12 per cent from 1 July 2025.

It's a good idea to contribute to your super fund regularly to build your retirement savings, keeping in mind regulations like the general transfer balance cap, which will increase to A$2 million from 1 July 2025.

Typical business owner salary or pay

Many business owners pay themselves just enough to cover personal living expenses.

Common approach:

• Regular pay: Covers household essentials only
• Business buffer: Remaining cash stays in business for emergencies
• Bonus payments: Extra draws when business builds cash reserves

Paying yourself a regular, modest amount helps keep your business cash flow stable and gives you flexibility if your income changes.

How to pay yourself fairly as a business owner

Consistent payments create financial stability for both you and your business.

Benefits of regular payments:

• Personal budgeting: Predictable income makes household planning easier
• Business protection: Reduces temptation to take large, irregular amounts
• Mental clarity: Financial security helps you make better business decisions

How business reserves help: Emergency funds prevent you from reducing personal pay during tough periods.

An accountant or bookkeeper can help you decide how much to pay yourself now and plan for future changes.

Make paying yourself easier with accounting software

Managing your pay is simple with Xero accounting software. You can track owner drawings, run payroll for your company, and manage tax and superannuation obligations.

Xero gives you a real-time view of your cash flow, so you can decide how much to pay yourself and keep your business healthy. Try Xero for free.

FAQs on paying yourself as a business owner

Here are answers to common questions about paying yourself as a business owner.

What is the most tax effective way to pay yourself as a business owner?

For a company, it's often a mix of a modest salary and dividends from profits. This can help manage your personal and company tax obligations. For a sole trader, you pay tax on all business profits, so the focus is on ensuring you set enough aside to cover your tax bill.

What is the 80% rule for sole traders in Australia?

The 80% rule relates to personal services income (PSI). According to the ATO, the rule applies if 80% or more of your personal services income (PSI) comes from a single client, in which case you do not meet the 80% rule and the PSI rules will apply. If this happens, the ATO may consider you to be more like an employee, which can affect the deductions you can claim. It's a way to ensure a fair distinction between independent contractors and employees.

How often should I pay myself as a business owner?

Consistency is key. Paying yourself a regular amount on a set schedule (like weekly or fortnightly) makes personal budgeting much easier and creates good financial habits for your business.

Do I need to pay superannuation to myself?

If you're a director of a company paying yourself a salary, then yes, the company must pay super guarantee contributions for you. If you're a sole trader, you're not required to, but it's highly recommended that you make personal contributions to your super fund for your retirement.