Home Forums Money matters How to pay yourself as a business owner?

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  • #999802
    Calypso333
    Member
    • Total posts: 1

    Hi,

    As a small business owner, what is the best way to pay yourself a wage?
    Do you need to pay yourself superannuation and tax like a regular employee?
    Do you put yourself on payroll as an employee?
    Should you just draw money from your profits and if so what legalities need to take place?

    Thanks.
    Kellie

    #1221414
    bb1
    Participant
    • Total posts: 4,472
    Calypso333, post: 267420, member: 116093 wrote:
    Hi,

    As a small business owner, what is the best way to pay yourself a wage?
    Do you need to pay yourself superannuation and tax like a regular employee?
    Do you put yourself on payroll as an employee?
    Should you just draw money from your profits and if so what legalities need to take place?

    Thanks.
    Kellie

    What is your business structure. ie. Pty Ltd, sole trader, partnership, etc, it makes a difference

    #1221415
    JamesMillar
    Participant
    • Total posts: 1,675

    Well first thing is that a sole trader can’t employ themselves because you can’t contract with yourself. Same for individual partner. As Bert said – it all comes down to what structure you operate within AND what state you operate. Remuneration strategies vary from state to state because of different laws regarding workcover, payroll tax etc.

    Kellie it might be time to spend some money and see an accountant.

    #1221416
    Mischelle
    Member
    • Total posts: 805

    I have a Pty Ltd, and I pay myself as an employee IE Pay payroll tax and super. I am on the payroll just like my other employees.

    #1221417
    RunicConvenience
    Member
    • Total posts: 186

    in regards to things like this I think you should speak to your accountant when setting up the business first and not brainstorm from internet forums because setting up anything “wrong” here can hurt you a lot in the future. so you want to make sure you do all the due diligence required before signing or setting any standards.

    #1221418
    Paul – FS Concierge
    Moderator
    • Total posts: 3,121

    Hi And Welcome to Flying Solo [USER=116093]@Calypso333[/USER] .

    It is great to have you!

    Thank you for joining our community and posting.

    Cheers

    #1221419
    Benny Browning
    Member
    • Total posts: 3
    Calypso333, post: 267420, member: 116093 wrote:
    Hi,

    As a small business owner, what is the best way to pay yourself a wage?
    Do you need to pay yourself superannuation and tax like a regular employee?
    Do you put yourself on payroll as an employee?
    Should you just draw money from your profits and if so what legalities need to take place?

    Thanks.
    Kellie

    Calypso333, post: 267420, member: 116093 wrote:
    Hi,

    As a small business owner, what is the best way to pay yourself a wage?
    Do you need to pay yourself superannuation and tax like a regular employee?
    Do you put yourself on payroll as an employee?
    Should you just draw money from your profits and if so what legalities need to take place?

    Thanks.
    Kellie
    Definitely pay yourself a wage as a business owner! Give yourself what you need to survive but retain what you can into a cash holding for the business so you retain funds in order to grow the business.
    I am on the payroll my book keeper treats me like any employee I get paid a wage and pay super etc etc
    Ben
    1800 For Promo

    #1221421
    rachaelshaw7
    Member
    • Total posts: 4

    what about the pros and cons of paying yourself via dividend?

    #1221422
    Benny Browning
    Member
    • Total posts: 3

    Definitely best to speak with your accountant and tailor the best solution for you. Everything cash wise you pull out of the company you will need to pay tax on. At least with weekly earnings you know where you are at and you can plan your personal life like anyone else. Try and make your business cash reserve as positive as you can so when the big opportunities present you have the capital to invest and make them happen!
    Ben Browning

    #1221423
    JamesMillar
    Participant
    • Total posts: 1,675
    Benny Browning, post: 267469, member: 116109 wrote:
    Definitely pay yourself a wage as a business owner! Give yourself what you need to survive but retain what you can into a cash holding for the business so you retain funds in order to grow the business.
    I am on the payroll my book keeper treats me like any employee I get paid a wage and pay super etc etc
    Ben
    1800 For Promo

    There are no definites with the information as presented. There are numerous factors that could result in significant tax savings that need to considered (unless of course you want to pay more tax than necessary – in which case Australia thanks you for the donation).

    #1221424
    bb1
    Participant
    • Total posts: 4,472
    JamesMillar, post: 267712, member: 5318 wrote:
    – in which case Australia thanks you for the donation).

    A little like people who choose to speed or break other road rules, I always thank them for their voluntary contribution

    #1221425
    Benny Browning
    Member
    • Total posts: 3
    JamesMillar, post: 267712, member: 5318 wrote:
    There are no definites with the information as presented. There are numerous factors that could result in significant tax savings that need to considered (unless of course you want to pay more tax than necessary – in which case Australia thanks you for the donation).

    I completely understand where you are coming from [USER=5318]@JamesMillar[/USER] but I needed to have a consistent income stream in which to present to banks so to successfully purchase property. Paying myself weekly gave me consistency in income. I’m pleased to say it has assisted my family by delivering shelter in a safe suburb. (Have I contributed too much?)
    Now I have purchased would you be suggesting there is a better way for me to be receiving regular (less taxed) income from my business? Not that I don’t like new parks and roads which I have clearly been putting my two cents worth into!!
    Cheers,
    Ben
    [Link Removed: Please set up your signature for any links]

    #1221426
    JamesMillar
    Participant
    • Total posts: 1,675
    Benny Browning, post: 267717, member: 116109 wrote:
    I completely understand where you are coming from [USER=5318]@JamesMillar[/USER] but I needed to have a consistent income stream in which to present to banks so to successfully purchase property. Paying myself weekly gave me consistency in income. I’m pleased to say it has assisted my family by delivering shelter in a safe suburb. (Have I contributed too much?)
    Now I have purchased would you be suggesting there is a better way for me to be receiving regular (less taxed) income from my business? Not that I don’t like new parks and roads which I have clearly been putting my two cents worth into!!
    Cheers,
    Ben
    1800 For Promo

    Borrowing is certainly very important and there is no question that the presentation of your income can effect a loan application. If you go through retail banking channels (branch or cold call to bank) they will tell you they require PAYG payment summary wage income in order to process a loan application for you efficiently. However, if you ask for a small business banker (they will generally have one available for any micro or small business with an ABN – no matter how small you are) then they can work around these issues and make an application that takes into account business income in other forms (trust distributions, dividends and retained company profits). Mortgage brokers can also do this – although its more work for them so their preference is always wage based income. More work for them is not your problem in my view. That’s their job and if dividends save you thousands in tax but they have to spend an extra few hours with an application in order to get their commission then so be it.

    So the short answer is that you have a company then your accountant should be reviewing your tax position before 30 June each year to consider opportunities and devise a plan for a potential combination of wages and franked dividends – potentially streamed to other family members. There are all sorts of factors to consider from year to year and late May early June is a good time because the Federal Budget will be done and there are often new opportunities that can require some finesse to access. In some cases we can determine within 5 to 10 minutes that tax planning will be of little net benefit so we do not proceed with a tax planning engagement (unless the client really wants it for their own peace of mind – and some do which is fine).

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