Shareholder Salary vs Dividends: How NZ Company Directors Should Pay Themselves in 2026

When you register a NZ company and start earning revenue, you need to decide how to pay yourself. The two main options are shareholder salary and dividends, and most NZ companies use a combination of both. Getting the balance right can save thousands of dollars in tax and ACC levies each year.

What Is a Shareholder Salary?

A shareholder salary (sometimes called a working director salary) is a payment made by the company to a working director for their services. It is treated as employment income for tax purposes, which means:

• It is deductible for the company (reduces company taxable income)
• The director pays income tax at their personal tax rate (10.5%, 17.5%, 30%, or 33% depending on income)
• ACC earners levies apply to the salary
• KiwiSaver contributions may apply (director can opt out)

For a new NZ company, the shareholder salary is usually the primary way working directors pay themselves, particularly in the first year when the company may not have enough retained earnings to pay dividends.

What Are Dividends?

Dividends are distributions of after-tax company profits to shareholders. Unlike salary, dividends:

• Are not deductible for the company (paid from after-tax profit)
• Are taxed at the shareholder's personal rate, with a credit for the company tax already paid (imputation credits)
• Do not attract ACC levies
• Are not subject to PAYE or KiwiSaver

The tax-free nature of dividends for ACC purposes is what makes them attractive in higher-income situations. If your company is profitable and you have already paid yourself enough salary to satisfy ACC and personal cashflow needs, dividends can be a more tax-efficient way to extract further profits.

How Imputation Credits Work

New Zealand operates a dividend imputation system designed to avoid double taxation. When your company pays tax at the company rate (currently 28%), those taxes generate imputation credits. When the company pays a dividend, it attaches those credits to the dividend.

If you are a 33% income tax rate payer, a fully imputed dividend of 2 carries 8 in imputation credits (the tax already paid by the company). You include 00 in your income, claim the 8 credit, and pay an additional in top-up tax. The company paid 8, you paid , total tax is 3, which equals 33% of the gross 00. No double tax.

Practical Example: Finding the Right Mix

Consider a NZ professional services company with one working director who is also the sole shareholder. The company earns 00,000 in revenue and has 0,000 in expenses (not including director pay), leaving 20,000 for the director.

Option 1: All salary

Pay 20,000 as shareholder salary. The company has zero taxable income. The director pays income tax on 20,000 (approximately 4,000) plus ACC levies (approximately ,600 at a standard rate). Total tax and ACC: approximately 6,600.

Option 2: Mixed salary and dividend

Pay 0,000 as salary and 0,000 as dividend. Company tax on 0,000 profit: 4,000. Director income tax on 0,000 salary: approximately 6,000 (plus ,600 ACC). Director income tax on 0,000 dividend: with imputation credits, approximately ,500 top-up. Total tax and ACC: approximately 4,100.

The saving in this example is around ,500 per year, primarily from avoiding ACC on the dividend portion. For higher-income directors, the saving is larger.

What Your Accountant Should Help You With

The right salary/dividend mix depends on your personal income tax rate, company profitability, ACC cover needs, and whether you have other shareholders. It also needs to be reviewed each year as circumstances change.

A good accountant will:

• Model different salary/dividend scenarios and show you the after-tax outcome
• Ensure your company tax returns and personal tax returns are filed correctly
• Manage imputation credit accounts and make sure dividends are correctly imputed
• Advise on KiwiSaver obligations and whether opting out makes sense
• Flag changes to ACC levies or income tax rates that affect the calculation

If you are a new NZ company director looking for an accountant who understands the shareholder salary and dividend trade-offs, FreshFirms can match you with a local accountant in your region.

Accountants and tax advisers: if you want to reach new NZ company directors at the moment they are making these decisions, FreshFirms delivers daily new company registrations with director contact details. Most new directors make their first accountant appointment within the first 60 days. Start a free trial to see your region's new companies.