How to pay yourself as a sole trader
New sole traders often ask how to put themselves on the payroll. The answer is that there is no payroll: the business money is already yours. That simplicity causes its own problems, mostly around tax, and this guide explains how to take money out without creating a bill you cannot pay in October.
Updated 16 September 2026. General information only, not tax advice.
Drawings, not wages
A sole trader and their business are the same legal person, so you cannot employ yourself. Transfers from the business account to your personal account are drawings: a movement of your own money from one pocket to another. There is no PAYG withholding, no payslip, no super guarantee, and the drawing is not a deductible expense of the business.
That is different from a company, where the owner can be an employee on a salary. See sole trader vs company.
Tax is on profit, not drawings
This is the point that catches people. If the business earns $90,000 and has $20,000 of deductions, your taxable business income is $70,000 regardless of whether you drew $30,000 or $70,000 during the year. Drawing less does not reduce tax; drawing more does not increase it.
The practical consequence: the tax on that $70,000 has to come from somewhere, and if you drew and spent it all, it has to come from next year’s income. That is how sole traders fall a year behind.
Separate the accounts
Step one is a business bank account that only business money goes through. Income lands there, business expenses are paid from there, and drawings are a single visible transfer to your personal account. It makes bookkeeping faster (FlowFi reads one statement, not three), keeps the ATO evidence clean, and makes the next steps possible.
A second business account for tax is step two. Some people use a third for GST. Whether you use two or three, the idea is the same: money that is not yours is not sitting where you can spend it.
Set the tax aside first
Before you draw anything, move the tax out. Two components:
- GST, if registered: one eleventh of every GST-inclusive payment you receive, less the GST on purchases. Moving the full eleventh and treating the credits as a bonus at BAS time is the safe version.
- Income tax: a percentage of profit. For many sole traders 25% to 30% of profit is a reasonable planning figure; check with our sole trader tax calculator or your accountant. Once you are in PAYG instalments, the quarterly instalment comes from this account.
See setting aside money for tax for a worked example.
Pay yourself regularly
Pick a fortnightly or monthly amount you can sustain in an average month, and transfer it on a fixed day like a salary. In a good month the surplus stays in the business account as a buffer; in a bad month the buffer covers the shortfall. That smooths your personal finances and stops the business account being treated as a wallet.
How much? Start from your personal budget, add a margin, and check it against the last six months of profit after tax. If the business cannot support the number, the answer is to change the business, not the number.
Super is your call
Nobody pays super for you. Deciding on a contribution and treating it like a bill, monthly or at year end, is part of paying yourself properly. Deductible contributions also reduce taxable income. See sole trader super contributions.
Recording drawings
Categorise every transfer to your personal account as drawings, not as an expense. If you pay a personal bill from the business account by mistake, categorise it as drawings too. And if you put personal money into the business, that is capital introduced, not income. Keeping these straight is what makes your profit figure right, and the profit figure is what the tax is on.
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Frequently asked questions
Can I pay myself super guarantee as a sole trader?
No, there is no super guarantee for yourself. You can make personal contributions and claim them as a deduction, subject to the cap and the notice of intent process.
Do I need to report drawings to the ATO?
Not as such. Your tax return reports business income and expenses; drawings are not part of either. Your records should show them so profit is calculated correctly.
What if I use the business account for everything?
It works, but every private purchase has to be identified and excluded, which is slow and error-prone. A separate account is the single biggest bookkeeping improvement most sole traders can make.
General information only, not tax advice. Check your own situation with a registered tax agent or the ATO.
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