How To Pay Yourself As NZ Business Owner

Published Friday 7 November 2025

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
• Typical business owner salary or pay
• How to pay yourself fairly as a business owner
• Keeping records when you pay yourself
• Managing your business finances made simple
• Frequently asked questions about paying yourself as a business owner

Key takeaways

• Determine your payment method based on your business structure—sole traders withdraw money as drawings and pay tax on all withdrawals, while company owners typically use a combination of salary and dividends to potentially reduce tax obligations.

• Set aside 20-30% of your earnings for tax obligations and maintain 30-90 days of operating expenses as emergency reserves to ensure both personal and business financial stability.

• Establish a consistent payment schedule with conservative amounts covering basic living costs, leaving the majority of profits in the business as a financial buffer for operational stability.

• Maintain detailed records of all payments to yourself and consult with an accountant or tax professional to optimize your payment structure and ensure compliance with tax requirements.

Why pay yourself as a business owner

Paying yourself is a vital part of running a healthy business. It's not just a reward for your hard work – it creates a clear line between your personal and business finances. This financial discipline helps you budget more effectively at home and in the business. A regular, predictable income gives you more financial certainty, so you can focus on growing your business with confidence.

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 two main categories:

• operate as a sole trader if you have not set up a company
• register a company as a separate legal entity

How to pay yourself as a sole trader or partnership

As a sole trader, you pay yourself by withdrawing money from your business account. Here’s what you need to know:

• withdraw money as needed—these are called drawings
• pay tax on all withdrawals as they count as taxable profit at year end
• set aside 20–30% of earnings for tax, or use the IRD’s effective tax rate for your profit level

How to pay yourself as a company

If you own a company, you usually pay yourself with a mix of salary and dividends. This approach may change as tax rules are reviewed to address ways some owners reduce their personal tax rates.

• pay yourself a salary, which is a business expense and subject to PAYE tax
• take dividends from after-tax profits
• use a mix of a small salary and regular dividends

Get tax advice

Paying yourself a salary as a company owner involves more administration and costs. Speak to an accountant or tax professional to decide what works best for you.

How much to pay yourself

You need to balance your personal financial needs with your business cash flow. Paying yourself the right amount helps keep your household and business stable.

What the business needs

Your business needs cash for:

• pay operating expenses, such as bills and wages
• keep emergency reserves for 30–90 days of expenses
• invest in growth, such as equipment, marketing or professional services (some legal expenses are tax deductible up to $10,000 each year)

What the household needs

Make sure your household budget covers daily living costs and debt repayments, such as your mortgage. Plan for insurance and retirement, which your employer may have managed before you started your business.

Finding a balance

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

Typical business owner salary or pay

Most business owners pay themselves modestly to keep cash in the business.

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

Common payment pattern:

• Regular pay: Conservative amount covering basic living costs
• Bonus payments: Extra withdrawals when cash reserves build up
• Business reserves: Majority of profits left for operational stability

How to pay yourself fairly as a business owner

Paying yourself fairly means being consistent and predictable, no matter the amount.

Key principles:

• Consistency: Set regular payment amounts and timing
• Predictability: Enables effective household budgeting
• Business buffer: Maintain reserves to avoid personal financial pressure

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.

Keeping records when you pay yourself

Good record keeping is essential when you pay yourself. It helps you track income and manage tax obligations so you can meet important deadlines, such as Inland Revenue’s requirement to file your return by 7 July. Whether you take a regular salary or drawings, record each transaction.

Managing your business finances made simple

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

Xero’s tools simplify your bookkeeping, so you can spend less time on admin and more time running your business. Try Xero for free.

FAQs on paying yourself as a business owner

Here are some common questions business owners have about paying themselves.

What is the most tax effective way to pay yourself?

If you own a company, taking a small salary and dividends from profits can help you pay less tax. If you are a sole trader, all your income is personal income. Speak to an accountant to find the best approach for you.

How often should I pay myself as a business owner?

Pay yourself on a regular schedule, such as weekly or monthly. This helps you manage your personal budget and keeps your business cash flow predictable. Choose a frequency that matches your business income.

Do I need to use payroll software to pay myself?

If you own a company and pay yourself a salary, using payroll software is a good idea. It automates tax calculations and helps you meet Inland Revenue’s requirements, especially as tax administration is now more automated. If you are a sole trader taking drawings, you do not need payroll software, but accounting software can help you track your withdrawals.