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.
No, sole traders cannot pay themselves a salary or wage in the traditional sense. The ATO clarifies that since you’re the business owner, you’re not considered an employee. Sole trader income can only be accessed through drawings from your business bank account (having a separate account is recommended for clarity).
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.
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