Show me the Money! Getting Money Out of Your Company

A practical guide for business owners

Most business owners I speak with understand that their company is a separate legal entity — but what that means for actually getting paid can feel surprisingly complicated. You've worked hard to build a profitable business, so understanding how to extract that value in the most tax-effective way isn't just accounting housekeeping. It's one of the most important decisions you'll make as a director and shareholder.

There are four main ways to take money out of your company, each with different tax implications, compliance obligations, and cash flow timing. Let's walk through them.

The Four Methods at a Glance

Drawings

Flexible — but watch that current account

Drawings are simply money you take out of the company throughout the year — wages not yet processed, advances against your shareholder salary, or just cash when you need it. They're recorded against your current account (a running ledger between you and your company).

The key risk here is an overdrawn current account. If your current account goes into debit — meaning you've taken out more than the company owes you — IRD can treat that as a loan from the company to you. That triggers an obligation to charge a market interest rate on the overdrawn balance, and that interest becomes taxable income for the company. If it's left unaddressed, it can also raise questions about your company's solvency.

PAYE Wages

Clean, compliant, but inflexible

Putting yourself on the payroll as an employee of your own company is perfectly legitimate and common. You receive regular wages, the company deducts PAYE, and pays it to IRD — just like any other employee. This gives you a consistent personal income, supports mortgage applications, and keeps things tidy.

The risk many owners don't anticipate is over-taxing. If you set your salary too high and the company ends up with lower taxable profit than expected — or even a loss — you may have paid more PAYE than the situation warranted. The company can't simply refund that excess; it creates a mismatch that needs careful reconciliation.

PAYE wages also attract ACC levies. As a working owner, you'll be levied on your liable earnings, which can be a meaningful cost depending on your industry classification.

Shareholder Salary

The year-end balancing act

A shareholder salary is typically a book entry made at the end of the financial year once your accountant has a clear picture of the company's taxable income. Unlike PAYE wages, it isn't run through payroll week by week — instead, it's declared as a resolution and posted in the accounts at balance date.

This method gives you flexibility. You can set the salary at an amount that efficiently distributes income between the company and yourself, taking into account both the 28% company tax rate and your personal marginal rate. If the shareholder salary is set to bring company taxable income to nil, the company pays no tax — all income is effectively taxed in your hands personally.

One important note: if ACC applies, a shareholder salary will typically be included in your liable earnings, so levies still need to be considered.   Inthis situation setting the ACC level with Coverplus-Extra  is generally preferred.  The salary must be reasonable and properly documented — it's not simply an arbitrary number.

Dividends

Using the company's tax credits

Once your company has been paying tax at 28%, it builds up imputation credits — essentially a record of tax already paid. When the company pays a dividend to shareholders, those imputation credits can be attached, reducing the additional tax you pay personally.

For example, if you're taxed at 33% personally, a fully imputed dividend means you're only paying the 5% difference at the top — the company has already paid the rest. This makes dividends particularly efficient once a company has accumulated retained profits and a solid imputation credit account balance.

The downside is timing and eligibility. Dividends can only be paid from retained profits (the company must have distributable reserves), and you need to ensure the company remains solvent after the payment. They also can't be used to create a tax loss in the company, unlike a shareholder salary.

Which Approach Is Right for You?

In practice, most owner-operators use a combination of these methods — drawings throughout the year to cover living costs, a shareholder salary set at year-end to manage taxable income efficiently, and dividends once the company has built up sufficient imputation credits and retained earnings.

The right mix depends on your personal tax rate, the company's profitability, your ACC classification, and whether you need regular reportable income (for lending purposes, for instance). There's no one-size-fits-all answer, and getting this wrong can mean paying more tax than necessary — or creating compliance headaches down the track.

This article is intended as general guidance only and does not constitute personalised tax or financial advice. Please contact Epplett & Co to discuss your specific situation.

Sarah Walker is a Chartered Accountant and Director at Epplett & Co, Hastings, Hawke's Bay. Epplett & Co provides accounting, tax, and business advisory services to clients across the Hawke's Bay region.