How Should You Pay Yourself From Your Company? Salary, Dividends or Trust Distributions (2026–27)
How should you pay yourself from your company? Salary and dividends are common options. If a family trust owns the shares, the company may pay a dividend to the trust and the trustee may distribute trust income to eligible beneficiaries. These are separate steps. Eligible base rate entities pay 25% company tax; other companies generally pay 30%. Your personal tax, super, cash needs and ownership structure all affect the outcome.
This matters if your company makes more profit than you need to live on. It doesn't apply if you're a sole trader or in a partnership of individuals. There, all the profit lands on your own tax return whatever you call it.
Does this apply to your business?
It does if any of these sound familiar:
Your salary was set when the business was half its current size, and nobody has looked at it since.
You take money out when you need it and your accountant works out what to call it at year end.
The company made a good profit, you took most of it as wages, and your tax bill had a 4 in front of the percentage.
Your spouse works in the business, or owns part of it, and you're not sure their share is set up properly.
You have a family trust and you've heard the rules are changing.
The company's money belongs to the company. Working in a company you own does not by itself settle every employment question. Payments may be salary or directors' fees, dividends, genuine expense reimbursements, repayment of money the company owes you, or loans. Each needs the right records and treatment; a trust distribution is made by the trustee, not directly by the company.
How much tax do you pay on salary vs dividends?
Dana's company has $200,000 profit before her remuneration in 2026–27. Sam, her husband, has no other income. These simplified comparisons assume both are adult Australian residents for the full year, a 25% eligible base rate entity, fully franked dividends, entitlement to all franking offsets, deductible remuneration and super paid within the required time, and no PSI attribution. They include a flat 2% Medicare levy and 15% super contributions tax, but exclude tax offsets other than franking credits, Medicare levy surcharge, HELP repayments, payroll tax and other income or deductions. Option 4 assumes a trust already owns the shares and can validly distribute to Sam. Rounded figures are illustrative, not a recommendation to change ownership.
1. All salary. The company spends the full $200,000 on Dana's pay: a salary of $178,571 plus 12% super of $21,429. The company pays no tax, because wages and super are deductible. Dana pays $50,713 in income tax and Medicare levy, and her super fund pays $3,214. Total tax: $53,927.
2. A $90,000 salary, the rest as a franked dividend. After Dana's salary and $10,800 super, the company has $99,200 profit left. It pays 25% tax ($24,800) and pays her the remaining $74,400 as a dividend. The dividend is franked, which means it carries a credit for the tax the company already paid. Dana is taxed on $189,200 and pays $30,058 after the credit. Total tax: $56,478.
3. A $90,000 salary, the rest stays in the company. The same as option 2, but the $74,400 isn't paid out. It stays in the company to fund stock, equipment or a cash buffer. Dana pays $19,320 on her salary. Total tax this year: $45,740.
4. A $90,000 salary, and the dividend goes to Sam through an existing family trust shareholder. The company pays a $74,400 fully franked dividend to the trust, carrying $24,800 in franking credits. Assuming Sam is validly entitled to the franked distribution and credits, his assessable amount is $99,200. His income tax and Medicare levy are $22,264 before the $24,800 offset, producing a $2,536 refund. Total tax across the company, Dana, Sam and super is $43,204.
Option | Total tax this year | Cash in hand |
1. All salary | $53,927 | $127,858, plus $18,214 in super |
2. Salary plus dividend to Dana | $56,478 | $134,342, plus $9,180 in super |
3. Salary, rest kept in the company | $45,740 | $70,680, plus $74,400 still in the company and $9,180 in super |
4. Salary plus dividend to Sam via trust | $43,204 | $147,616 for the household, plus $9,180 in super |
Three things stand out.
Salary versus dividend barely matters when it all ends up on one person's tax return. Options 1 and 2 are about $2,500 apart, and that gap comes from super, which is taxed at 15%.
Leaving profit in the company defers tax. Option 3 saves about $8,200 this year. Dana pays the rest when the money eventually comes out as a dividend. It only works if she can live on the salary.
Who is entitled to the income matters. In this example, option 4 has about $13,300 less combined tax than option 2 because Sam has a lower taxable income. That depends on existing ownership, valid trust entitlements, franking eligibility and integrity rules. Proposed trust reform may change future outcomes.
Is the way you pay yourself still right for the business you have now? If your salary was set years ago and the profit has grown since, we can look at what you're taking, how it's taxed and what a better mix might be.
Should you pay yourself a salary?
For most owners who work in the business, yes, at least a base amount. A salary gives you:
A tax deduction for the company, for both the wages and the super.
Super contributions, generally at 12% of qualifying earnings. The standard concessional cap is $32,500 for 2026–27; contributions are usually taxed at 15%, with additional tax or other rules applying in some cases.
PAYG withholding spreads tax payments through the year, although other income and adjustments may still leave tax payable.
Payslips and an income history, which lenders want to see when you apply for a home loan.
Employment costs may also include workers compensation and payroll tax, depending on the state, remuneration and grouping rules. From 1 July 2026, Payday Super generally requires contributions to be received by the fund within seven business days of payday, with extended timeframes for some cases. Super is calculated on qualifying earnings under the applicable rules.
Compare the total company, personal and super tax rather than treating 25% company tax as the final tax on money you spend personally. A fully franked dividend brings the grossed-up amount into your assessable income, with a credit for company tax where you qualify.
When do dividends make sense?
Dividends distribute value to shareholders under their share rights. Retaining profit can defer personal tax until a later dividend, but the applicable company tax rate, franking position, dividend rules and cash requirements must all be checked.
What to know before relying on dividends:
Check the Corporations Act dividend tests, the constitution and share rights. Assets must exceed liabilities by enough, the payment must be fair and reasonable to shareholders as a whole, and it must not materially prejudice creditors. Accounting profits, tax treatment and franking capacity require separate consideration.
Dividends are not tax deductible for the company. They come out of profit that has already been taxed.
A franked dividend carries a franking credit for the company tax already paid. If your tax rate is above 25%, you pay the difference. This is often called top-up tax.
No super is paid on dividends.
Dividends follow the rights attached to the shares. Different share classes or a trust shareholder need specific review; you cannot simply choose a different recipient after payment.
The paperwork matters. A dividend needs a directors' resolution and a dividend statement, dated when it was declared. It can't be created after the fact.
That fifth point is why how your shares are owned matters more than which label you put on the payment.
Do trust distributions still work?
A family trust, also called a discretionary trust, can own the shares in your company or run the business itself. Each year the trustee decides which family members receive the income. That's how option 4 sends the dividend to Sam.
Trust distributions require more than choosing a lower-tax family member. Check the following before relying on the example.
The decision has to be made by 30 June. The trustee has to resolve who gets what before the year ends, in line with the trust deed.
The entitlement and benefit must be genuine. Section 100A can apply where an entitlement is connected with an agreement benefiting someone else, a tax-reduction purpose and dealings outside ordinary family or commercial dealing. Family cash sharing does not automatically establish a breach, but the arrangement needs review.
Proposed changes need to be considered separately. The government introduced legislation in October 2026 for a 30% minimum tax on discretionary trusts from 1 July 2028. This article's 2026–27 example does not model that proposed regime. Check the legislation's current status, exclusions and final terms before acting.
If you're thinking about setting up a trust now, or you already rely on one, the proposed change belongs in the decision. Don't restructure on an announcement alone.
Where do growing businesses get caught?
Taking drawings and naming them later
A transfer to an owner may require Division 7A review if it is not properly treated as remuneration, a dividend, reimbursement or repayment of a genuine debt. Depending on the facts, exclusions and distributable surplus, payments or loans can result in an unfranked deemed dividend. New loans generally need repayment or a complying written agreement before lodgment day—the earlier of the return's due date and actual lodgment. Use the ATO benchmark rate for the relevant income year and meet the ongoing repayment requirements.
Paying a spouse for work they don't do
A salary to a family member has to be reasonable for the work they actually do. If it isn't, the ATO can deny the company's deduction for the excess.
Splitting income that is really your own labour
If most of the company's income comes from your personal skills, as it does for many consultants and contractors, the personal services income (PSI) rules can push the income back onto your own tax return, whatever the structure says.
Backdating
Record what actually happened when it happened. Salary, bonuses, dividends, debt offsets and trust entitlements have different legal, payroll and tax requirements. A later journal does not create a historical resolution or payment. Genuine errors can sometimes be corrected, but documents must not be backdated.
Not paying your own super
If you're on the payroll, the company owes super on your wages, on time, like any other employee. Miss it and the company pays the super guarantee charge, with interest and penalties on top. Directors can be made personally liable for it.
Leaving profit in the company, then borrowing it back
Option 3 only works if the money stays in the company. Lend it to yourself and you're back in Division 7A.
Wondering whether your structure can do what you need? Dividends and trust distributions only work when the right entity owns the right thing. We can talk through how your structure is set up and whether it still fits.
Why set your pay mix before Christmas, not in June?
Review the mix early enough to implement it properly. A June review may still offer options, but decisions, payments and records must satisfy their actual deadlines.
An October-to-December review can use the prior year's accounts and current trading to plan the remaining months. Set a realistic salary, retain cash for business commitments, check dividend capacity and revisit forecasts as results change. The right timing depends on your company; there is no universal pre-Christmas deadline.
Checklist: how to pay yourself in 2026–27
Work out what you need to live on for the year, after tax.
Estimate the company's profit for 2026–27 before your own pay.
Set a base salary through payroll, with super paid each payday.
Decide how much profit the business needs to keep for stock, equipment, tax and a buffer.
Check who owns the shares, and whether that still suits your family.
Check the company's franking account balance before planning a dividend.
If you have a family trust, diarise the distribution resolution for well before 30 June 2027.
Clear or document any balance in your director loan account.
Review the mix again in March, when the year's profit is clearer.
When should you get advice?
Before the year's money has already moved. Once it's been paid out, the options narrow to tidying up.
If your company is making more than you need to live on and nobody has reviewed your pay mix recently, it is worth a conversation. HelloLedger can consider remuneration, ownership, company cash and tax together, alongside your ongoing accounting and tax work.
Key rates and figures (2026–27)
Item | Figure |
Personal tax, $0 to $18,200 | Nil |
Personal tax, $18,201 to $45,000 | 15% |
Personal tax, $45,001 to $135,000 | 30% |
Personal tax, $135,001 to $190,000 | 37% |
Personal tax, over $190,000 | 45% |
Medicare levy | 2% |
Company tax rate, base rate entity | 25% where aggregated turnover is below $50 million and no more than 80% of assessable income is base rate entity passive income. |
Company tax rate, other companies | 30% |
Super guarantee | 12% |
Concessional super contributions cap | $32,500 |
Maximum super contribution base | $270,830 a year |
Division 7A benchmark interest rate | Use the ATO benchmark rate for the relevant income year. |
Proposed minimum tax on discretionary trusts | 30% from 1 July 2028. Not yet law. |
Paying yourself from a company: FAQs
Is it better to pay myself a salary or dividends?
In the illustrated case, paying everything to the same person produces a similar total result, but that is not universal. Super contributions, other income, company rate, franking credits and timing can change the comparison. Assess the combined result and what cash the business needs to retain.
Are dividends tax deductible for my company?
Dividends are not deductible to the company. Salary and super may be deductible when the applicable conditions and payment timing are satisfied.
Does my company have to pay me a salary?
A director is not automatically required to receive a salary. Actual employment arrangements and entitlements still matter. Record each payment according to its legal character, including genuine reimbursements and repayments of shareholder advances.
Do I have to pay super on my own salary?
Super guarantee can apply to salary and directors' fees, generally at 12% of qualifying earnings subject to the applicable rules and maximum contribution base. Genuine dividends and trust distributions are not salary or wages for this purpose.
Can I just transfer money from the company account when I need it?
Check the basis before transferring money. An unexplained transfer may create a loan or payment requiring Division 7A review. A qualifying repayment, valid dividend offset or complying agreement may be available within the relevant deadline; the facts and exclusions matter.
Can I pay my spouse a salary or dividends to save tax?
A salary, only for work they really do, at a reasonable rate. Dividends, only if they own shares or the shares are held through a family trust. Both need to be set up before the money is paid.
Can I change how I pay myself part-way through the year?
You can review future salary and dividends during the year, subject to employment arrangements, corporate requirements and tax rules. Correct genuine errors where appropriate, but do not backdate documents or assume a later journal changes what an earlier payment was.
What does it cost to get this wrong?
The result depends on the issue. An unfranked deemed dividend, denied deduction, unpaid super, interest or penalties can materially change the cost. Company tax is not necessarily the final tax on owner withdrawals, and a deemed dividend does not itself cancel the debt.
This is general information only and doesn't take into account your personal circumstances.
