How to Pay Yourself as a Director of Your NZ Company

The director's pay question

When you register a new limited company in New Zealand, you are a separate legal entity from the company itself. That means you cannot simply take money from the company bank account as if it were your own - there are proper ways to do it, and the choice has tax implications.

Option 1: Director's salary (PAYE)

You can pay yourself a salary or wages as a director. This is an employment income, so PAYE, student loan repayments (if applicable), and KiwiSaver contributions apply. The company must file Employment Information with IRD each pay period. Your salary is a deductible business expense for the company.

A regular salary is clean and predictable. It helps with mortgage applications and other personal finance matters because you have a steady income on record. The downside is the administrative overhead of running payroll and the fact that you cannot vary it easily based on how the business is doing.

Option 2: Director's drawings (shareholder current account)

Instead of a salary, many small company directors take 'drawings' from the business - essentially advance payments against anticipated dividends. These are recorded in a 'director's current account' or 'shareholder current account' in your accounting software.

Drawings are not a business expense, so they do not reduce the company's taxable profit directly. Instead, the company pays tax on its profit, and when you later declare dividends, the company may pay withholding tax on those dividends depending on your circumstances. Talk to your accountant - this can be structured tax-efficiently if done correctly.

Option 3: Dividends

If your company makes a profit after tax, you can distribute some of that profit to shareholders as a dividend. Dividends are paid from after-tax profit and may attract resident withholding tax (RWT) depending on the shareholder's tax rate. Your company must be profitable to declare a dividend - you cannot pay a dividend from capital.

What most small NZ company directors actually do

A common approach is to take a modest salary (enough to cover personal living costs and KiwiSaver obligations), with any additional distributions handled as tax-efficient dividends at year-end after your accountant has optimised the structure. The right mix depends on your personal tax rate, the company's profit, and your financial goals.

The golden rule: separate your finances

Whatever method you use, keep company money separate from personal money. Maintain a dedicated business bank account and do not pay personal expenses from the company account without recording them properly. This makes your accountant's job much easier and keeps you on the right side of IRD and Companies Office obligations.

Get tax structuring advice early

The way you pay yourself out of your company is one of the most significant tax decisions you will make as a new director. Getting good advice from an accountant in your first few months can save thousands over time. If you want to be connected with a local tax advisor or accountant who works with new NZ companies, use our free matching service.