How to Pay Yourself as a Company Director in Australia (2026): Salary, Dividends, Loans and Super

When you trade through a company, the money in the business account isn't yours — it's the company's. Getting it to you in a way the ATO accepts is one of the first questions new directors ask, and one of the most common sources of surprise tax bills. This guide is for owner-directors of small Australian proprietary companies. It explains the three legitimate ways to pay yourself — salary or directors' fees, franked dividends and Division 7A loans — how each is taxed in 2026, the super and payroll obligations that come with a salary, the 8.77% Division 7A benchmark rate for 2026–27, and a worked A$ comparison.

Quick answer

Pay yourself as a director through salary or directors' fees (deductible to the company, taxed at your marginal rate, with super), through franked dividends (paid from after-tax profit, with franking credits), or — temporarily — through a loan that meets Division 7A rules. Most owner-directors combine a regular salary with dividends at year-end. Money taken without being recorded as one of these is treated as a loan, and if it isn't repaid or put on a complying agreement by the company's lodgment day, it's taxed as an unfranked dividend.

• Salary/fees: PAYG withholding, STP reporting and 12% super guarantee

• Dividends: franked at 25% for base rate entities; no super; consider PAYG instalments

• Division 7A benchmark rate 2026–27: 8.77% (2025–26: 8.37%)

• Complying loans: written agreement, minimum yearly repayments, 7 years max term (or 25 years if secured by real property)

Why you can't just transfer the money

A proprietary company is a separate legal person. Its profit belongs to it, it pays tax at 25% (if it's a base rate entity — aggregated turnover under A$50 million and no more than 80% passive income) or 30%, and it can only pass value to you in recognised ways. Directors who treat the business account like a personal one — paying the mortgage, school fees or a holiday from it — haven't paid themselves in a tax sense. They've borrowed from the company.

That matters because of Division 7A of the Income Tax Assessment Act 1936. It's an integrity rule that stops shareholders and their associates taking company profits tax-free as loans, payments or forgiven debts. If the company lends you money and the loan isn't repaid, or put under a complying loan agreement, by the company's lodgment day for that year (the earlier of the due date and the actual lodgment date of its tax return), the amount is treated as a dividend paid to you — generally unfranked, so you pay full marginal tax on it with no credit for the company tax already paid. The deemed dividend is limited to the company's distributable surplus, but for a profitable company that rarely helps.

The same applies to company money spent on your behalf — a private car, a personal credit card bill paid from the business account, or a family member's school fees. Each is a payment to an associate that Division 7A can catch unless it's treated as salary, a dividend or a properly documented loan, or you reimburse the company. Fringe benefits tax can also apply where you receive a benefit as an employee rather than as a shareholder.

So the first rule of paying yourself is to decide what each payment is — wage, fee, dividend or loan — and record it as that at the time. Your bookkeeper can't fix an undocumented withdrawal after the lodgment day.

What happens to money you take from the company

Step 1

Withdrawal from company account

Step 2

Salary / fee?

payslip, PAYG, STP, super

Step 3

Dividend?

resolution + distribution statement

Step 4

Otherwise a loan

complying agreement by lodgment day

Step 5

No agreement

unfranked deemed dividend

Option 1: salary or directors' fees

You can pay yourself a wage as an employee of the company (for running the business day to day) or a directors' fee (for acting as director), or both. For tax purposes they work much the same way.

For the company, the salary and the super on it are tax-deductible, reducing the company's profit and its tax. For you, the salary is taxed at your marginal rate. For 2026–27 the resident rates are: nil on the first A$18,200, 15% to A$45,000, 30% to A$135,000, 37% to A$190,000 and 45% above, plus the 2% Medicare levy.

A salary brings payroll obligations, even when you're the only employee:

• PAYG withholding. The company withholds tax using the ATO tax tables and pays it with its BAS — see our PAYG withholding guide.
• Single Touch Payroll. Directors' fees and wages are in scope for STP. As a closely held payee, an owner-director of a company with 19 or fewer payees can be reported each payday, quarterly with actual figures, or quarterly with a reasonable estimate. See our Single Touch Payroll guide.
• Super guarantee. The company generally has to pay super guarantee of 12% on your qualifying earnings. Since Payday Super began on 1 July 2026, it must reach your fund within 7 business days of each payday.
• Other on-costs. Directors' remuneration can count as wages for state payroll tax once a business is above its state threshold, and workers compensation rules for working directors vary by state.

The benefit of a salary is predictability: regular income for loan applications, a steady super balance, and income that counts as "income from work" for offsets and borrowing purposes.

Option 2: franked dividends

A dividend is a distribution of the company's after-tax profit to shareholders. It isn't deductible to the company, but because the company has already paid tax on the profit, Australia's imputation system lets it attach franking credits to the dividend.

When you receive a franked dividend, you include both the cash and the franking credit in your assessable income (the "gross-up"), work out tax at your marginal rate, then subtract the franking credit as a tax offset. If the credit exceeds your tax, the excess is refunded to individuals. For a base rate entity taxed at 25%, the maximum franking credit is one-third of the cash dividend: a A$75,000 fully franked dividend carries A$25,000 of credits.

Dividends have practical advantages. They can be decided at year-end once profit is known; they don't attract super guarantee, PAYG withholding or payroll tax; and they're not reported through STP. But they have limits:

• They can only be paid to shareholders, in proportion to their shares unless the constitution allows different classes — so a dividend may not suit if a co-owner wants different treatment.
• The company must meet the Corporations Act test: assets exceed liabilities by enough, the dividend is fair and reasonable to shareholders, and it doesn't materially prejudice the company's ability to pay creditors.
• Without PAYG withholding, the tax on large dividends is paid when you lodge, and the ATO is likely to enter you into PAYG instalments.
• No super is built up.

Record each dividend with a directors' resolution and give each shareholder a distribution statement showing the amount, franking credit and franking percentage. Our company tax rate guide explains how franking interacts with the 25% and 30% rates.

Option 3: loans under Division 7A

Sometimes you need cash before the year's profit is clear. A loan from the company can bridge the gap — provided it's a complying loan under section 109N. By the company's lodgment day for the year the loan was made, there must be:

• a written loan agreement, signed and dated, identifying lender and borrower and setting out the essential terms;
• interest at least the benchmark interest rate for each year after the year the loan was made; and
• a maximum term of 7 years, or 25 years if the loan is secured by a registered mortgage over real property worth at least 110% of the loan.

From the following year you must make a minimum yearly repayment by 30 June. Any shortfall is a deemed dividend for that year. The ATO works out the minimum repayment on an "amalgamated loan" — all loans made to you in the same year on the same terms — and its Division 7A calculator and decision tool does the maths.

Division 7A numbers for 2026–27

8.77%

Benchmark interest rate

Income year ending 30 June 2027

8.37%

Previous year's rate

2025–26

7 years

Max term — unsecured

25 years

Max term — real property security

Value ≥ 110% of loan

The 2026–27 benchmark rate. The ATO sets the benchmark as the Reserve Bank's standard variable owner-occupier housing indicator rate last published before the start of the income year. For the year ending 30 June 2027 that's 8.77%, the rate published on 5 June 2026 — up from 8.37% for 2025–26. It doesn't change during the year even if the RBA's published rate does. Companies with a substituted accounting period use the rate last published before their own year starts.

A loan is a deferral, not a way to avoid tax. The repayments usually come from salary or dividends you've been taxed on, and the interest you pay is assessable income to the company. Used for years on end, loans simply move the tax bill — and the interest adds to it.

Super: building retirement savings through the company

Salary brings compulsory super; the company can also make extra contributions for you, or you can salary sacrifice. Employer contributions are deductible to the company and taxed at 15% in the fund — usually far below your marginal rate — but they count towards the concessional contributions cap of A$32,500 from 1 July 2026, together with any personal contributions you claim as a deduction. Exceeding the cap means the excess is taxed at your marginal rate.

Because super is taxed at 15% going in, a salary-plus-super strategy can leave you with more total wealth than dividends, even though less cash lands in your hands now (see the comparison below). The trade-off is access: super is generally locked away until preservation age.

Worked comparison in A$

Mia owns 100% of a Melbourne design company that is a base rate entity. In 2026–27 it expects A$160,000 of profit before paying her anything. She has no other income. These figures use 2026–27 resident rates and the Medicare levy, ignore offsets that cut out at this income, and are rounded.

What the table shows:

• All dividends leaves the most cash today, because Mia pays only A$3,470 on top of the company tax already paid — but she builds no super, and she'll probably be entered into PAYG instalments.
• All salary leaves the least cash, but the most total wealth once super is counted, because A$17,143 is taxed at 15% instead of her marginal rate.
• The mix sits between the two and is the most common real-world choice: a salary that covers living costs and builds super, with dividends declared once the accounts are finalised.

If Mia also left some profit in the company — taxed at 25% and paid out later in a lower-income year — her total tax could fall further. That's legitimate, as long as the profit is genuinely retained and not drawn as an undocumented loan.

Create a payslip for your director salaryFree, no login — shows gross pay, tax withheld and super for each pay run.

A Division 7A loan in A$

On 1 August 2026, Tom, the sole director and shareholder of a Gold Coast building company, takes A$50,000 from the company to cover a house deposit. Before the company lodges its 2026–27 return, his accountant puts a written seven-year loan agreement in place.

• No minimum repayment is due in 2026–27, the year the loan was made.
• In 2027–28, with six years of the term remaining, the minimum yearly repayment is the opening balance multiplied by that year's benchmark rate, divided by (1 − (1 + rate)^−6). If the 2027–28 rate were the same as this year's 8.77%, the minimum repayment on a A$50,000 opening balance would be about A$11,070, due by 30 June 2028.
• Tom plans to fund it from a franked dividend declared before 30 June 2028 and set off against the loan — a common approach, documented with a resolution and journal entries.

If no agreement had been signed by the lodgment day, the full A$50,000 would generally have been treated as an unfranked dividend in 2026–27, taxed at Tom's marginal rate with no franking credit.

Setting up how you pay yourself

1. 1

   Decide the mix at the start of the year

   Set a salary or directors' fee that covers living costs; plan dividends for after the year-end accounts.

2. 2

   Set up payroll for yourself

   TFN declaration, PAYG withholding, STP reporting (closely held payee options) and a super fund — paid within 7 business days of each payday.

3. 3

   Record every other withdrawal as a loan

   Use a separate loan account in your books, and sign a Division 7A agreement before the company's lodgment day.

4. 4

   Declare dividends properly

   Directors' resolution, solvency check, distribution statement with the franking credit.

5. 5

   Review at year-end with your accountant

   Clear or document loans, make minimum yearly repayments by 30 June, and check your concessional cap.

Rules that can override your choice

Personal services income. If the company's income is mainly a reward for your personal skills or effort — consulting, IT contracting, some trades — and it doesn't pass the results test, the 80% rule or the other personal services business tests, the PSI rules can attribute the income to you personally, regardless of whether you paid yourself a salary or dividends. A company can't be used to split that income with family or keep it at the company rate.

Reasonableness. Paying a non-working family member a large salary, or a director an excessive one, can be challenged; the deduction is limited to what's reasonable for the work done.

Director penalty regime. Directors can be made personally liable for the company's unpaid PAYG withholding and super guarantee charge — and in some cases GST — through director penalty notices. Paying yourself first while the company falls behind on these is a high-risk strategy.

Trust distributions. If your company is owned by a family trust, dividends flow to the trust and then to beneficiaries, which brings in trust distribution and section 100A rules. Get advice on that structure.

Common mistakes

• No records. Every payment to you should be a payslip, a dividend resolution or a loan entry.
• Ignoring super under Payday Super. Your own salary is subject to the same 7 business days deadline as any employee's.
• Large dividends with no tax set aside. Dividends have no withholding. Put tax aside or expect a bill and instalments.
• Rolling loans forever. Loans are a timing tool, not a pay strategy.
• Not checking your concessional cap before extra super contributions.

Official links

• ATO — Division 7A benchmark interest rateCurrent and past rates
• ATO — Division 7A: loans and other forms of creditComplying loan agreements and repayments
• ATO — Tax rates for Australian residents2026–27 rates
• ATO — Closely held payees in STPReporting your own salary or fees
• ATO — Contributions capsConcessional cap

Next steps

Sit down with your accountant before 30 June and set a salary that covers your living costs, check your Division 7A loan balance and the 2026–27 minimum repayment, and plan dividends once the profit is known. Set up your own pay in your payroll software with STP and super, then generate payslips with the free salary slip generator. For background, read our guides to the company tax rate, Single Touch Payroll and the superannuation guarantee.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the best way to pay yourself as a company director in Australia?

Most owner-directors use a mix: a salary or directors' fee through payroll, which attracts super and gives steady income, plus franked dividends from after-tax profit when the year's results are known. Salary is deductible to the company; dividends aren't but carry franking credits. Drawing cash without either creates a loan that must meet Division 7A rules. The right mix depends on your income, super position and cash needs.

Can I just take money out of my company's bank account?

Legally the money belongs to the company, not you. Unless it's recorded as salary, directors' fees, a dividend or a repayment of money you lent the company, a withdrawal is treated as a loan to you. If it isn't repaid or put under a complying Division 7A loan agreement by the company's lodgment day, it can be taxed as an unfranked dividend in your hands.

What is the Division 7A benchmark interest rate for 2026–27?

It's 8.77% for private companies with a 30 June year end, up from 8.37% in 2025–26. It's the Reserve Bank's standard variable owner-occupier housing indicator rate published before 1 July 2026. Complying loans must charge at least this rate, and it sets the minimum yearly repayment due by 30 June 2027 on existing loans.

Do I have to pay super on my own director salary?

Yes, if you pay yourself a salary or directors' fees, the company generally owes super guarantee at 12% on your qualifying earnings, just as for any employee, and under Payday Super it must reach your fund within 7 business days of payday. Dividends don't attract super guarantee. You report the salary or fees through Single Touch Payroll.

How are franked dividends taxed?

You include the dividend plus the attached franking credit in your taxable income and get a tax offset for the credit. For a company taxed at the 25% base rate, a fully franked A$75,000 dividend carries A$25,000 of credits, so you're taxed on A$100,000 and get A$25,000 back against your tax. If your marginal rate is below the company rate, the excess credit is refunded.

Do I pay PAYG withholding on my own salary?

Yes. A salary or directors' fee is subject to PAYG withholding like any wage: the company withholds tax using the ATO tax tables, reports it through STP and pays it with its BAS. Small employers can report closely held payees such as owner-directors quarterly. Dividends aren't subject to PAYG withholding, so you may enter PAYG instalments for the tax on them.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 11 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Division 7A benchmark interest rate — Australian Taxation Office · accessed 11 October 2026
2. 2.Statistical Table F5 — Indicator Lending Rates — Reserve Bank of Australia · accessed 11 October 2026
3. 3.Division 7A — loans and other forms of credit — Australian Taxation Office · accessed 11 October 2026
4. 4.STP reporting for closely held payees — Australian Taxation Office · accessed 11 October 2026
5. 5.Director fee superannuation: do you need to pay super to company directors? — Employment Hero · accessed 11 October 2026
6. 6.Director loans and Division 7A in Australia — Sleek · accessed 11 October 2026