How Much Should a Company Director Be Paid in Australia?

As a small business owner, it’s completely normal to ask how much you should pay yourself as a company director.

On one hand, you want director pay that reflects the work you’re doing and supports your lifestyle. On the other hand, paying the “wrong” amount (or paying it the wrong way) can create tax issues, cash flow headaches, or governance problems if there are other shareholders involved.

The good news is there’s no single “perfect” number. Instead, the right director remuneration in Australia depends on your business structure, profitability, growth stage, cash flow, and how you’re choosing to take money out of the company (salary, fees, dividends, loans, or a combination).

Important: This article provides general legal information only and isn’t financial, accounting, or tax advice. Because the tax treatment of director payments can vary significantly depending on your circumstances, it’s best to speak with a qualified accountant or tax adviser before you decide how (and how much) to pay yourself.

Below, we’ll walk through the key factors so you can set director remuneration with confidence, document it properly, and avoid common pitfalls.

What Do We Mean By “Director Salary”?

In everyday conversations, “director salary” often means any money a director takes home from their company.

But legally and practically, “director pay” can be made up of a few different things, and it’s worth separating them because they can be treated differently for tax, payroll, and compliance purposes.

Director Salary vs Director Fees

A director may be paid like an employee via wages/salary through payroll (often with PAYG withholding and superannuation), or they may be paid for performing director duties (often called “director fees”).

In small businesses, directors are frequently also working in the business day-to-day (sales, operations, service delivery), which can blur the lines.

If you’re unsure about terminology, it can help to first clarify whether the payment is meant to be:

• Employment income (you’re working “in” the business, like a manager or staff member), or
• Director remuneration (you’re being paid for acting as a director, including governance and oversight).

This distinction isn’t just academic. It can affect:

• how you run payroll,
• super obligations,
• record-keeping, and
• how you justify payments to other shareholders (if applicable).

For a deeper look at how director payments are typically described, director remuneration is often discussed as director fees in Australia.

Other Ways Directors Get Paid (Beyond “Salary”)

Depending on your setup, you might take money out of the company through:

• Wages/salary via payroll
• Director fees
• Dividends (if you’re also a shareholder)
• Director loans (borrowing from the company, or the company lending to you)
• Reimbursements (repaying business expenses you personally covered)

Each method has different legal and tax consequences, so the “how” matters just as much as the “how much”. For advice on tax outcomes and the most appropriate mix for your situation, you should also speak with your accountant or tax adviser.

How Much Does A Director Get Paid In Australia?

If you’re searching “director salary” or “how much does a director get paid”, you’ve probably seen wildly different numbers. That’s because the market range is broad and depends heavily on context.

For small businesses, a more useful way to think about director pay is not “What’s the average?” but:

• What can the business sustainably afford?
• What level of responsibility and time is the director actually contributing?
• What’s the cleanest, lowest-risk way to pay that amount (from a legal and record-keeping perspective)?

Key Factors That Influence A Director Salary

When setting director remuneration, it usually comes down to a combination of commercial reality and legal/tax hygiene. Common factors include:

• Business profitability: Are you consistently profitable, or still in build mode?
• Cash flow stability: Even profitable businesses can have tight cash flow.
• Your role: Are you hands-on running operations, or mainly performing governance?
• Time commitment: Full-time, part-time, or occasional board involvement?
• Number of directors: More directors often means remuneration needs clearer structure.
• Shareholding and investor expectations: If others own shares, your pay needs to be defensible and documented.
• Growth plans: If you’re hiring key staff or applying for finance, you may want predictable payroll.

A Practical Benchmark Approach (Without Guessing)

Rather than picking a number that “feels right”, many small business owners land on a director salary by using a simple framework (ideally with input from an accountant/bookkeeper who understands your cash flow and tax obligations):

• Step 1: Work out a sustainable monthly amount the business can pay out after allowing for operating costs and setting aside money for known obligations (such as tax and super) and a cash buffer.
• Step 2: Decide what portion should be paid as salary/fees (stable, payroll-based) versus other methods (like dividends).
• Step 3: Set a figure you can maintain for at least 3-6 months without putting the business under stress.
• Step 4: Review quarterly as your revenue stabilises or grows.

This approach keeps director pay realistic, and helps avoid the common trap of paying yourself too much too early (and then having to scramble when BAS, GST, or supplier payments fall due).

Director Pay: The Legal And Compliance Basics You Shouldn’t Ignore

Even if you’re the only director and shareholder, it’s still important to treat director pay as a proper business decision (not just “moving money around”).

Here are the big compliance areas we typically see small businesses overlook when setting director remuneration.

1) Employment Law (If You’re Treating It As Salary)

If you’re paying yourself as an employee of the company, you’ll usually be running payroll and dealing with PAYG withholding and superannuation.

It also helps to be clear on the legal character of what you’re receiving (for example, are you paying yourself a “salary” or “wages” and what does that mean in practice?). The wording you use in internal records, bookkeeping, and contracts should be consistent with how you’re actually paying it. If you’re unsure on terminology, salary vs wages is a helpful distinction to understand early.

And if you’re paying yourself like an employee, it’s often worth having an Employment Contract in place (yes, even for founders in some setups) so roles, responsibilities, and remuneration are clearly documented.

2) Superannuation: Is Super Included Or On Top?

One of the most common small business “gotchas” is confusion about whether an amount is inclusive of super or plus super.

This matters because if you think you’re paying yourself (or another director) $X “including super”, but you record it incorrectly, you can end up underpaying super without realising.

Superannuation rules can be fact-specific (including how a director is engaged and paid), so if you’re unsure what applies in your circumstances, it’s best to confirm with your accountant/bookkeeper or the ATO guidance.

It’s also easy to accidentally advertise or agree to a number that creates misunderstandings later. If you want clarity on the terminology, does gross salary include super is a common question that comes up when setting remuneration packages.

3) Corporate Governance (Especially With Multiple Owners)

If your company has more than one shareholder (for example, you started the business with a co-founder), director salary decisions should not be “informal”.

It’s important to make sure:

• director remuneration is approved appropriately (depending on your constitution and shareholder arrangements),
• conflicts are managed, and
• the pay level aligns with what the business can afford and what shareholders expect.

This is where having the right governance documents can prevent misunderstandings. For example, a well-drafted Company Constitution can set out how director decisions are made, and a Shareholders Agreement can deal with remuneration approvals, reserved matters, and dispute pathways.

Without these guardrails, director salary can quickly become a flashpoint-particularly if one director is more active day-to-day than the other.

4) Avoiding “Informal” Drawings That Create Problems Later

Many directors start by simply transferring money from the company account to their personal account when needed. While that can feel simple, it can create messy outcomes if it’s not correctly categorised (salary, loan, reimbursement, dividend, etc.).

If it’s treated as a loan (even unintentionally), you’ll want to understand director loans properly. What is a director loan is a good starting point before you rely on this method.

From a risk perspective, it’s almost always better to choose a method, document it, and keep it consistent-rather than “mixing” approaches without a paper trail.

How Can You Pay A Director? (Salary, Fees, Dividends Or Loans)

There’s no one-size-fits-all answer to director pay. Many small businesses use a combination, especially as the business matures.

Here are the most common approaches, and when they tend to make sense.

Option 1: Pay A Director Salary Through Payroll

This is the “steady” approach. The company pays the director a regular amount (weekly, fortnightly, or monthly), and handles payroll obligations like PAYG withholding and superannuation (where applicable, depending on how the director is engaged and paid).

This option can be a good fit if:

• you rely on consistent personal income,
• you want predictable budgeting,
• you’re applying for finance (lenders often like stable income evidence), or
• your company is operating with stable cash flow.

The trade-off is that payroll creates ongoing compliance tasks, and you need to be confident the business can maintain the salary through quieter periods.

Option 2: Pay Director Fees

Director fees can be used where the payment is more about remunerating the governance role of being a director, rather than “employment” work.

In practice, small businesses sometimes use director fees where:

• a director is non-executive (not working in the business daily), or
• the company wants flexibility in how and when it pays directors.

Because this can overlap with employment and tax treatment depending on your circumstances, it’s worth getting advice (including tax advice) to make sure the setup matches what you’re actually doing.

Option 3: Dividends (If You’re A Shareholder)

If you’re both a director and a shareholder, dividends can be part of your overall director pay strategy (even though dividends technically aren’t salary).

Dividends are usually tied to profits and company law rules. That means they’re typically not as predictable as a payroll salary-particularly in early-stage businesses where profits fluctuate.

Dividends can also create fairness questions if there are multiple shareholders, because dividends are generally paid according to share ownership (not who worked the hardest that quarter).

Option 4: Director Loans (Proceed Carefully)

Director loans can arise when:

• you take money out and it’s recorded as “owing to the company”, or
• you personally fund company expenses and the company owes you money back.

Loans can be legitimate, but they need to be carefully recorded and managed. If not, they can trigger tax issues and disputes-especially when a business has more than one owner, or when relationships change. It’s a good idea to get accounting/tax advice before relying on director loans as a regular way to access funds.

So, Which One Is “Best”?

For many small businesses, the most practical approach is:

• a modest, stable director salary that covers your essentials, and
• an additional profit-based component (like dividends) when the business performs well and cash flow supports it.

That balance lets you pay yourself regularly without draining the business during leaner months.

From a legal perspective, the most important thing is that whatever approach you choose is:

• documented (so it’s clear what it is),
• consistent (so bookkeeping and compliance are easier), and
• aligned with your corporate structure (especially if there are multiple decision-makers).

When you’re thinking about the overall strategy, it can help to step back and look at the bigger picture of how to legally pay yourself as a business owner.

How To Set A Director Salary That Makes Sense For Your Small Business

Setting a director salary is part maths, part strategy, and part risk management.

Here’s a practical process you can use to land on a figure that works for your business and supports you as the owner.

1) Start With Your Business Budget (Not Your Personal Wish List)

It’s tempting to reverse-engineer your director salary based on what you want to earn. But for small businesses, it’s safer to start with what the company can reliably afford.

A simple way to do this is to map:

• fixed monthly overheads (rent, software, suppliers, utilities),
• wages for staff/contractors,
• tax and super obligations, and
• a buffer for unexpected costs.

Then see what’s left as a “safe” director pay range (and consider checking it with your accountant to make sure you’re setting aside enough for tax and other liabilities).

2) Decide Whether Your Director Salary Is Fixed Or Variable

Many businesses use a fixed director salary for stability. Others use a smaller “base” and a variable top-up when the business has a strong month.

Either can work, but avoid a setup where your salary is so high that it forces the business to dip into tax money or emergency reserves.

3) Keep An Eye On Fairness (If There Are Co-Founders Or Other Shareholders)

Where there are multiple owners, you’ll want to be especially careful about how you set and adjust director salary.

Some practical questions to ask are:

• Are both directors being paid, or only the working director?
• Are you paying based on time worked, responsibilities, or ownership?
• Does your agreement say that director remuneration needs approval?
• How will director salary change if one director steps back or hires a manager?

These questions are much easier to resolve upfront than in the middle of a dispute.

4) Put The Decision In Writing

Even in a small company, it’s wise to document:

• what the director is being paid (salary, fees, or otherwise),
• how often payments happen, and
• who approved the arrangement.

This can help with governance, accounting, and protecting relationships-particularly if your company grows or brings on investors later.

5) Review Regularly As Your Business Evolves

Your director salary shouldn’t necessarily be “set and forget”. In most small businesses, it changes as revenue becomes more predictable, the team expands, or your role shifts from doing everything to managing people and strategy.

A quarterly review is often enough to keep it aligned with your current stage of growth.

Key Takeaways

• A “director salary” can mean different things in practice, including wages, director fees, dividends, or loans-so it’s important to be clear on what you’re actually paying and why.
• How much a director should be paid depends less on averages and more on your business’s profitability, cash flow, and how hands-on the director role is.
• Different payment methods can have different tax, accounting, and compliance outcomes, so it’s worth speaking with an accountant/tax adviser before you decide what’s right for you.
• If there are multiple owners, decisions about director pay should be documented and aligned with your constitution and shareholder arrangements to avoid disputes later.
• Using informal transfers can create accounting and tax issues-choosing a clear method (and sticking to it) is usually safer and easier to manage.

If you’d like help setting up a clear, legally sound director remuneration arrangement for your company, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.