How to Pay Yourself as a Director and Avoid This Expensive Tax Trap.

January 31, 2026
Samuel Jones
12:58 pm

You’ve finally done it. After years of refining your systems, countless late nights putting out fires, and doing everything you can to keep your NDIS business running smoothly, your business is finally profitable!

Now comes the big question: How do you actually take that money out of the business? Can you just withdraw it and start spending all haphazardly? Surely the tax man won’t mind… right?

It’s a common question, and one that most people will get wrong without deep research or seeking professional guidance.

So how do you get your hard earned money out of the business and start enjoying the fruits of your labour? Keep reading and we’ll breakdown 4 options which will keep you compliant (spoiler, the tax-man does mind).

Option One: Director Wages and Salaries

This is the most common and arguably the simplest method. The way it goes is you pay yourself a wage the same as you would with any other employee, which includes paying superannuation and PAYG withholding tax on your behalf.

Benefits

Its straightforward and easy to manage.
The ATO likes this method because tax is paid throughout the year, therefore lower compliance risk.
Useful when your business has consistent and predictable cashflow.

Drawbacks

You have less cash in the business because you’re paying withholding tax and 12% superannuation.
You miss out on the benefit of paying tax at the 25% corporate rate and receiving franking credits (which is a WHOLE other topic we’ll have to discuss elsewhere)

For new NDIS Businesses. this approach may be problematic when cashflow is inconsistent. When an unexpected issue arises such as a delayed payment, disputed invoice or an unexpected expense, the business will still need to cover your wages and you may end up wishing hadn’t paid that super and tax so soon.

For established companies with a healthy cash buffer, paying director wages becomes more viable. However, even then, it’s not always the most common or tax‑effective approach. While it’s simple and keeps you compliant, it’s rarely the strategy that delivers the best long‑term tax outcome.

Option Two: Director Fees

Director fees are similar to wages. You still have to pay superannuation and PAYG withholding tax, however its a more flexible option and often used by directors of larger companies who typically don’t participate in the day-to-day support work.

In smaller businesses, it’s common for the director to review the company’s profit before director payments and decide how much they can reasonably take out for personal use. This allows for more adaptability compared to a fixed wage

I’m not going to delve into the benefits and drawbacks for this one because its so similar to option one. Sorry if you had your heart set on option two following the same format as option one.

By this point you’re probably thinking “there’s got to be another way!” There sure is. Without further ado, I present to you…. Option Three.

Option Three: Dividends

Now, if we’re getting technical (which we are because us accountants love getting technical), dividends are paid to shareholders, not directors. However in most NDIS businesses, and most other private businesses in general, the directors and shareholders are usually the same person.

So with that technicality out of the way, what makes option three unique?

1. Dividends don’t attract PAYG withholding tax or superannuation, which is a big win for cashflow!

2. Unlike director fees or wages, dividends are not a business expense. They’re paid from profits after the company has already paid tax. This is great because it gives you flexibility. You can wait until the end of the financial year, review your final position, then decide how much to pay out to yourself as a dividend.

3. When the company pays tax on its profits, it allows shareholders (you) to receive a credit for that tax in your personal tax return through the magic of franking credits! This results in a lower personal tax bill, and in some cases can even be refunded to you.

Dividends are a popular option because they are usually the most tax effective way to extract profits from the company. You’ll likely need to pay higher accounting fees because of the additional paperwork and tax planning involved. However with a good accountant, the tax savings will far outweigh the additional costs.

Option 4: Directors Loan

Strap yourself in because Option 4 is the riskiest and most complex of the strategies. However considering you’ve read this far your clearly someone who takes compliance seriously so lets get dive in.

As director and owner of your business you can simply withdraw money from the company which isn’t a wage or dividend. When you do this, the ATO considers it a loan from the company to yourself with the expectation that the money will be paid back.

This strategy is absolutely fine so long as the director doesn’t owe any money back to the company before the tax return due date or lodgement date.

For Example, if a director withdraws $50,000 throughout the year to pay for personal expenses, the company can “repay” this loan by declaring a $50,000 dividend or paying $50,000 in director fees. This repays the loan and keeps everything compliant.

(Don’t stop reading now because you’re about to learn what the expensive tax trap you need to avoid is!!!)

The risk comes about when directors take money out of the company and don’t pay it back, thus un-wittingly triggering the infamous Division 7A Provisions.

Without going into too much detail, Division 7A applies when you take out more money from the company than you put in.

If managed properly having a division 7A loan is not a catastrophe….

What IS a catastrophe, is when these loans arise without the director realising it because they’re not paying any attention to their finances. In some situations, directors can end up owing the company A LOT of interest from loans they didn’t know existed AND having to pay tax on that interest!!

In all seriousness, this trap is so common and so dangerous so please be careful and be aware. If you find yourself spending a lot of untaxed company money on personal expenses, make sure you know what the balance of your director loan is.

Which is the best option?

It really does depend on your situation. Please don’t take this as personalised accounting or tax advice. Please don’t read the final paragraph, assume it’s applicable to your business without consulting with an expert, get a negative tax outcome and sue me. I will refer the judge to this paragraph.

Although you have just read a very informative overview, there are still so many moving parts to consider when deciding what’s right for your business.

Now with that said…. dividends are generally best.

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JONES & CO. ADVISORY

How to Pay Yourself as a Director and Avoid This Expensive Tax Trap.

Tired of Having to Explain the NDIS to Your Accountant?

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