How to pay yourself as a sole trader
A sole trader is considered to be a self-employed individual. This means you can pay yourself in a number of different ways as outlined in our blog below.
How do I get paid as a sole trader?
As a sole trader, you can pay yourself in a number of different ways including the following options:
Sole traders can take money out of their business for personal use through drawings from a business bank account. Drawings aren’t considered wages or salary. Therefore, drawings aren’t taxed in the same way as other forms of income. However, they aren’t tax deductible for the business.
Sole traders can pay themselves a salary, just like an employee of the business. This salary will be subject to income tax and will need to be reported on the sole trader’s personal tax return. The salary must also comply with minimum wage requirements set by the Fair Work Commission.
If your business is set up as a company, you can pay yourself dividends from the profits of the business. Dividends are taxed differently from salaries and drawings. Dividends may be a more tax-effective way to pay yourself. However, it’s important to note that not all businesses are eligible to pay dividends.
As a sole trader, you are responsible for your own superannuation. You can make voluntary contributions to your superannuation fund or set up a self-managed super fund (SMSF) to manage your retirement savings. It’s easy to automate super calculations as a sole trader and make super contributions using Payroller’s integration with BEAM super clearing house.
Do I need to do payroll as a sole trader?
It’s important to keep accurate records of all payments made to yourself as a sole trader, including amounts paid and payment methods. This makes it easier to complete your personal tax return and ensure that you are meeting your tax obligations. It’s also a good idea to speak with a qualified accountant for advice on tax effectiveness.
Calculate PAYG, taxes and superannuation automatically by setting up your details as an employee in Payroller, the easiest payroll provider for sole traders.