When you first start a business, it can feel strange to pay yourself. The money is sitting in the business account, the bills are covered, and you're not sure what you're allowed to take out and when. This confusion is extremely common — and it leads a lot of small business owners to either underpay themselves for years, or make mistakes that cause headaches at tax time.

Here's a plain English guide to paying yourself correctly, depending on how your business is structured.

If You're a Sole Trader

As a sole trader, you and your business are legally the same entity. There is no salary arrangement between you and your business — you simply draw money out of the business account as needed. These are called drawings.

The important thing to understand is that your drawings are not tax-deductible business expenses. Your taxable income is your total business profit — not your profit minus what you paid yourself. You pay tax on the whole thing.

This means you need to set aside money for tax as you go. A common approach is to set aside 25–30% of every payment you receive into a separate savings account, so you're never caught short when your tax bill arrives.

If You're in a Partnership

Partners also take drawings rather than salaries. The partnership itself doesn't pay tax — instead, profits are distributed between partners according to the partnership agreement, and each partner pays tax on their share at their individual tax rate.

If You're a Company Director

If you've set up a company (Pty Ltd), you are an employee of that company — even if you're the only person in it. This means you pay yourself a salary, which is a legitimate business expense and is deductible to the company.

As an employee, the company must:

You can also pay yourself dividends from company profits. Dividends are paid after company tax (currently 25% for base rate entities), and come with franking credits that offset your personal tax liability. A good accountant can help you find the most tax-effective balance between salary and dividends.

How Much Should You Pay Yourself?

This is the part most business owners struggle with. The temptation is to leave everything in the business, but underpaying yourself creates problems — it makes the business look more profitable than it really is, and it means you're effectively working for free.

A reasonable starting point is to pay yourself at the market rate for someone doing your job — what would you have to pay an employee to replace you? That figure is a useful benchmark for what the business should be generating to sustain itself long term.

Get Advice

Every business situation is different, and the right structure and pay arrangement for you depends on your income, your circumstances, and your goals. A registered accountant or BAS agent can help you set up a system that is both legally correct and tax-efficient from day one.

The money you spend on good accounting advice early almost always pays for itself many times over.