We’re heading towards the end of the financial year, showing a small profit – but we haven’t paid ourselves yet. Is there a smart, tax-effective way to do it? Should we pay ourselves as contractors? Make a director’s payment? It just feels odd to pay company tax when we haven’t drawn a cent.”
If this sounds familiar, you’re not alone. Many early-stage founders find themselves in this exact position—pushing hard to grow the business, achieving some early traction and revenue, but still not paying themselves a regular salary.
And with 30 June looming, it’s only natural to ask: How do we pay ourselves without triggering unnecessary tax?
Let’s break down your options…
Contractor Payments
If you have an ABN and a legitimate contractor arrangement—meaning you invoice the company for your time and have autonomy over how you work—you can invoice the business for services rendered.
This can give you flexibility and even allow some personal deductions. But tread carefully: the ATO has strict definitions about who qualifies as a contractor versus an employee. If it walks and talks like employment, they’ll treat it as such. This approach works best in very specific circumstances and must be properly documented.
Director Fees
For most early-stage founders, director fees are the cleanest and most tax-effective option.
Director fees are payments made to directors for work performed—think business development, admin, strategic planning—anything you’ve done to keep the wheels turning. These payments are:
- Deductible to the company (reducing taxable profit)
- Taxable to you personally
- Potentially subject to PAYG withholding, depending on the amount
Paying a director’s fee before 30 June means you’re fairly compensated and you reduce the company’s tax bill. Win-win. Just make sure you record the decision properly (e.g. board minutes or a resolution).
💬 “It’s not just about taking money out—it’s about being strategic. Done right, director fees can be a smart way to reward yourself for your effort while reducing tax for the company,” says Remco Marcelis, CEO and Founder of Standard Ledger.
Dividends
You can also declare a dividend from retained earnings. But dividends aren’t deductible to the company, and you’ll need franking credits to make them worthwhile. For early-stage or small-profit businesses, this usually isn’t the best route—yet.
The Takeaway
If you’re a founder sitting on a modest profit and wondering how to pay yourself without giving more to the ATO than necessary, director payments are often the most straightforward and compliant option. Just make sure you follow the correct process and get some advice tailored to your company setup.
And remember—getting this wrong could lead to more tax or compliance headaches down the track.
👉 Still feeling a bit “meh” about EOFY altogether? You’re not alone. This article digs into why so many founders tune out at tax time—and why that mindset might be costing you.
Need help figuring this out before 30 June?
Let’s chat. We’ll help you work out the right way to pay yourself and keep the tax man happy. No fluff—just clear advice from startup accounting specialists.
Book a free EOFY strategy chat with us. We’ve got your back.
