How Much Should You Pay Yourself as a Business Owner?

Last Updated July 2026

It's one of the most common questions business owners ask, and one of the hardest to answer with a single number: how much should I actually be paying myself?

Pay yourself too little, and you're propping up the business with your own lifestyle — working full-time hours for less than you'd earn employed elsewhere. Pay yourself too much, too early, and you can starve the business of the cash it needs to grow, or create a tax problem you didn't see coming.

There's no universal figure, but there is a sensible way to work through the decision — and it depends heavily on your structure.

Start With What the Business Can Actually Afford.

Before structure or tax comes into it, the starting point is always the same: what can the business genuinely sustain without putting itself at risk?

A simple way to approach this is to build a cash flow forecast that treats your own pay as a fixed cost, the same as rent or wages — not as whatever happens to be left over at the end of the month. If the business can't consistently cover a reasonable amount for you after covering its own costs, tax obligations, and a buffer for lean periods, that's a signal worth acting on early rather than discovering it in a cash crunch later.

How You're Paid Depends on Your Structure

Sole Trader

If you're a sole trader, there's no real distinction between "the business" and "you" — any money you take out is a drawing, not a wage, and it isn't a tax deduction to the business. All business profit is taxed in your hands at your individual marginal rate regardless of how much you actually draw out.

This means the "how much should I pay myself" question for a sole trader is really a cash flow question, not a tax question — you're taxed on the full profit either way, so the decision comes down to how much you personally need to draw versus how much you want to leave in the business for working capital.

Company

If you operate through a company, you're generally paid one of two ways: as a wage (with PAYG withholding and superannuation, like any other employee) or as a dividend (a distribution of company profits, after company tax has already been paid). Unlike a sole trader, the company is a separate legal entity, so money shouldn't simply be transferred from the business account to your personal account without considering the correct tax treatment.

Wages are deductible to the company and generally require PAYG withholding and compulsory superannuation contributions where applicable. Dividends come with franking credits attached (reflecting the tax the company has already paid), which can reduce or eliminate further tax depending on your personal tax bracket. Many business owners use a mix of both — a modest base wage to build super and demonstrate consistent income (useful for things like home loan applications), topped up with dividends when profits allow.

The right mix depends on your income level, your marginal tax rate, how much the company needs to retain for growth, and whether you're trying to build up superannuation. This is a genuinely worthwhile conversation to have with your accountant each year, not a set-and-forget decision — the optimal mix can shift as your income, the company's profit, and tax thresholds change.

Trust

If you're operating through a trust, you're generally paid via distributions of trust income, allocated at the trustee's discretion (within the trust deed's rules) rather than as a fixed wage. Distributions need to be properly documented and resolved before 30 June each year, and how they're split between beneficiaries can have a significant impact on the overall tax outcome for the family or business group. Unlike companies, trusts generally don't retain taxable profits in the same way, so annual distribution planning is particularly important.

Common Mistakes Business Owners Make

1. Underpaying themselves for too long. It's common in the early years to reinvest everything and pay yourself last — but if this continues well past the startup phase, it can mask whether the business model is actually viable, and it takes a real toll personally.

   
   

2. Treating the business bank account like a personal one. Especially in companies, drawing money out inconsistently without formally treating it as wages or dividends can create a Division 7A issue — effectively an unintended loan from the company that comes with its own tax consequences if it isn't managed correctly.

   
   

3. Not reviewing the split regularly. What made sense three years ago at a lower income level may not be the most tax-effective approach now. This is worth revisiting at least annually, ideally as part of a broader tax planning conversation before year-end.

The Bottom Line

There's no fixed formula for how much you should pay yourself — it depends on what the business can sustain, your structure, your personal financial needs, and your broader tax position. The businesses that get this right tend to treat it as an ongoing decision reviewed regularly, not a number set once and forgotten.

Frequently Asked Questions

1. Should I pay myself a wage or take dividends from my company?

It depends on your income level, tax bracket, and superannuation goals. Many business owners use a combination of both — a base wage for consistency and super contributions, topped up with dividends when profits allow. This is worth reviewing with your accountant based on your specific numbers each year.

2. How much should a small business owner pay themselves?

There's no fixed percentage or figure — it depends on what the business can sustainably afford after covering its own costs and obligations, your personal financial needs, and your business structure. A cash flow forecast is the best starting point for working this out.

3. What is Division 7A and how does it relate to paying myself?

Division 7A is an ATO rule that applies when a private company provides money, benefits, or loans to a shareholder or associate without properly treating it as a wage, dividend, or documented loan. If drawings from a company aren't handled correctly, they can be deemed an unfranked dividend, which usually results in a higher tax bill than intended.

4. Can I just take money out of my business whenever I need it?

As a sole trader, yes — drawings are simply personal access to profit that's already taxed in your hands. In a company or trust, it's more complicated: money taken out needs to be properly classified as wages, dividends, or a documented loan repaid on time, or it can trigger unwanted tax consequences.

5. Should I leave money in my business or pay it out?

It depends on your business's cash flow, upcoming expenses and your personal tax position. Leaving funds in the business can help finance future growth, while paying profits out may be appropriate if you need the income personally. The right approach depends on your structure and should be reviewed as part of your annual tax planning.