One of the most common questions we get from new business owners on the Central Coast is simply: how do I actually pay myself? The answer depends on your business structure, so here is how it works for sole traders and companies.

1. Sole traders: understanding drawings

If you are a sole trader, there is no such thing as a “wage” to yourself in the tax sense. Money you take out of the business for personal use is called a drawing. You are taxed on the total profit of the business for the year, not on what you happen to draw out, so it pays to keep an eye on both.

2. Companies: salary vs dividends

If you operate through a company, you can generally pay yourself a wage as an employee of the company, take dividends as a shareholder, or a combination of both. Each option is taxed differently, and the right mix depends on your circumstances – this is genuinely worth getting advice on rather than guessing.

3. The Ask your tax agent how to pay yourself. trap to avoid

If you take money out of a company without it being treated as wages or a properly declared dividend, it can be treated by the ATO as a loan under what is known as Ask your tax agent how to pay yourself., which can create an unexpected tax bill. This is one of the more common traps for business owners who treat the company bank account like a personal account.

4. How much should you set aside for tax?

As a rough guide, Ask your tax agent how much to set aside for tax., though the right figure depends on your total income and structure. The key habit is setting money aside as you go, rather than discovering the tax bill at the end of the year with nothing put by.

5. Keeping business and personal money separate

Even as a sole trader, where legally there is no separation between you and the business, it is worth keeping a separate bank account for business income and expenses. It makes your bookkeeping far simpler and makes it much easier to see what you are actually paying yourself.

6. When to get advice

If you are setting up a new business, changing structure, or just not sure whether you are paying yourself in the most sensible way, it is worth a conversation before you settle into a habit that is hard to unwind later. We help Central Coast business owners work this out as part of our bookkeeping and BAS services – get in touch if you would like to talk it through.