How to pay yourself as a business owner

Published Friday 6 November 2026

Table of contents

• Why pay yourself as a business owner
• How to pay yourself as a sole trader or as a company
• How much to pay yourself
• How to pay yourself fairly as a business owner
• Typical business owner salary or pay
• Keeping records when you pay yourself
• Simplify paying yourself with Xero
• FAQs on paying yourself as a business owner

Key takeaways

• Choose your payment method based on your business structure: sole traders withdraw money as drawings, while company owners typically use a mix of salary and dividends to suit their income needs and company profits.
• Set your pay at a consistent, conservative amount that covers basic household costs, and keep the majority of profits in the business as a financial buffer for stability.
• Set aside money for tax obligations as you earn, and register for goods and services tax (GST) if your turnover is over $60,000 in the last 12 months, or expected to be in the next 12 months, to stay compliant with Inland Revenue Department (IRD) requirements.
• Keep detailed records of every payment to yourself for at least seven years, and work with an accountant to find the right structure for your situation.

Why pay yourself as a business owner

Paying yourself creates a clear line between your personal and business finances. This separation helps you budget more effectively for both personal and business expenses.

A regular, predictable income gives you more financial certainty. You can focus on growing your business with confidence instead of worrying about personal cash flow.

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

Business structure determines how you pay yourself and your tax obligations. Most New Zealand business owners fall into one of two categories:

• Sole trader or partnership: you and the business are the same legal entity
• Company: a separate legal entity from you as the owner

How to pay yourself as a sole trader or partnership

As a sole trader, you pay yourself through drawings, which are withdrawals from your business account for personal use.

• Drawings: withdraw money as needed for personal expenses
• Tax treatment:pay tax on all business profit at year end, regardless of how much you withdraw, so estimate your tax bill early
• Tax planning: set aside money for tax based on your expected profit level to cover upcoming provisional tax payments

How to pay yourself as a company

If you own a company, you have several options for paying yourself. Many owners use a combination of methods to suit their income needs and company profits.

Salary (PAYE)

A salary is a regular payment from the company to you as an employee. The company deducts Pay As You Earn (PAYE) tax from regular salary payments, just like any other employee, and must also make employer contributions to KiwiSaver. The default employer contribution rate is 3.5% from 1 April 2026, rising to 4% from 1 April 2028.

• Tax treatment: salary is a deductible business expense that reduces company profit
• PAYE deductions: the company deducts tax at source each pay period and shows it on your payslip
• Regular payments: you receive consistent, predictable income
• Accident Compensation Corporation (ACC) levies: ACC earners' levy is deducted with PAYE on PAYE salary

Dividends

Dividends are payments to shareholders from company profits after tax. Directors can only approve a dividend if the company passes the solvency test.

• Solvency test: after the payment, the company must be able to pay its debts as they fall due and have more assets than liabilities
• Tax credits: dividends come with imputation credits for company tax already paid, which reduce the tax you pay personally
• Flexibility: you decide when and how much to distribute
• No deductions: dividends are not a deductible business expense for the company

Shareholder drawings (current account)

Shareholder drawings are withdrawals you record in your shareholder current account. These are not the same as sole trader drawings and create a debt you owe the company.

• Current account: tracks money you withdraw and owe back to the company
• Repayment expectation: you should repay drawings or offset them against salary or dividends
• Interest implications: charging no or low interest on an overdrawn account can mean deemed dividend or fringe benefit tax (FBT) rules apply
• Record keeping: maintain clear records of all transactions

Combining salary and dividends

Many company owners use a mix of salary and dividends to suit their income needs and company profits. A small regular salary covers living costs, while dividends provide additional income when profits allow.

Since June 2026, the Taxation (Budget Measures) Act 2026 taxes any loan you still owe the company as income six months after the company is removed from the register, so clear your current account before closing a company. Talk to your accountant about the right mix for your situation.

Get tax advice

Your choice between salary, dividends, and drawings affects your taxes differently based on your income and business situation. An accountant or tax professional can help you find the right structure and ensure you meet Inland Revenue Department (IRD) requirements.

How much to pay yourself

How much to pay yourself depends on what your household needs to cover expenses and what your business needs to stay healthy. Getting this balance right keeps both your personal finances and business cash flow stable.

What the business needs

Your business needs cash for:

• Operating expenses: bills, wages, and day-to-day costs
• Emergency reserves: a cash buffer to cover unexpected costs
• Growth investment: equipment, marketing, or professional services

What the household needs

Make sure your household budget covers:

• Daily living costs: food, utilities, transport, and regular expenses
• Debt repayments: mortgage, loans, and credit commitments
• Insurance: health, life, and income protection (coverage you may have had through previous employment)
• Retirement savings:KiwiSaver contributions or other investments

Finding a balance

You may need to adjust both your home and business budgets, especially when your business is new. Many owners start by paying themselves less than they'd like, then increase their pay as the business becomes more profitable and predictable.

How to pay yourself fairly as a business owner

Paying yourself fairly means setting up a consistent, predictable payment structure that works for both you and your business. The actual amount matters less than the reliability.

• Consistency: set regular payment amounts and stick to a schedule
• Predictability: enable effective household budgeting with reliable income
• Business buffer: maintain reserves so cash pressure doesn't force poor decisions

This approach protects your personal finances and helps you make better business decisions. An accountant or bookkeeper can help you decide how much to pay yourself now and plan for the future.

Typical business owner salary or pay

Most owners pay themselves modestly, just enough to cover household expenses. The remaining cash stays in the business as a financial buffer.

A common payment pattern:

• Regular pay: covers basic living costs with a conservative, predictable amount
• Bonus payments: provides extra income when cash reserves build up
• Business reserves: keeps the majority of profits in the business for stability

Keeping records when you pay yourself

Keep detailed records when you pay yourself. Track every payment and keep these records for at least seven years so you can manage tax obligations and meet IRD deadlines.

• Payment dates and amounts: when you paid yourself and how much
• Payment method: whether salary, dividends, or drawings
• Tax deductions: PAYE you withheld from salary payments
• Supporting documents: payslips, dividend resolutions, or bank statements

Whether you take a regular salary or drawings, record each transaction. This helps you file accurate returns by the 7 July deadline. If you use a tax agent with an extension of time, you may have up to 31 March the following year.

Simplify paying yourself with Xero

Setting up a clear process helps you manage your income and keep your business healthy.

Use accounting tools to track payments to yourself, manage cash flow, and stay on top of tax obligations. Spend less time on admin and more time running your business. Get one month free with Xero.

FAQs on paying yourself as a business owner

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

What's the best way to pay yourself?

Many company owners use a mix of salary and dividends, but the best mix depends on your circumstances, so ask an accountant. Sole traders pay tax on all business profit as personal income, so there's less flexibility.

How often should I pay myself as a business owner?

Pay yourself on a regular schedule, such as weekly, fortnightly, or monthly. Consistency helps with budgeting and financial planning for both your household and business. Choose a frequency that matches your cash flow and stick to it.

Can you pay yourself before your business makes a profit?

As a sole trader, you can take drawings at any time, and you pay income tax on the business's profit for the year. A company can pay you a salary as a business expense, but it can only pay dividends if it passes the solvency test after the payment.