As a company director, there are a few different ways that you can receive an income or payment for your services. In this article, we look at how a company director can be paid through a salary, directors’ fees or dividends.

1. Directors’ Salary

If the company also employs you in a role other than a director, it can pay you a salary like any other employee. It is also required to pay you the superannuation guarantee that is currently at the rate of 9.5%.

2. Directors’ Fees

Directors’ fees are effectively compensation for your services performed as a company director. As a director, you could be entitled to receive directors’ fees instead of a salary if:

  • you are not also an employee of the company; and
  • you satisfy certain procedural requirements. 

Your company’s constitution must also include a provision allowing the company to pay you via directors’ fees, which can include:

  • travelling costs;
  • costs associated with attending meetings; and
  • other expenses incurred in the position of a company director.

Alternatively, shareholders can approve this under Rule 202A of the Corporations Act 2001 (Cth).

Even though a director may not be classified as a company employee, directors’ fees are subject to superannuation and are calculated using ordinary time earnings (OTE). This includes what directors earn as part of services provided for their ordinary hours of work as set out in the relevant agreement they have with the company (e.g. the company constitution or a shareholders agreement). Directors’ fees are also subject to payroll tax much like a salary.

Companies need to ensure that they meet all of the procedural requirements when remunerating directors. A director of a company acting as a trustee for a trust will not have any entitlement to remuneration unless the company passes a resolution in a general meeting authorising this (Kelly v Commissioner of Taxation (No 2) [2012] FCA 689). In Kelly v Commissioner of Taxation, the company trustee had deducted superannuation contributions for its directors when the directors were not employees of the company. The court held that the directors were not entitled to these deductions because they had not met the regulatory requirements and did not fall within the scope of the term of ‘employee’ in section 12 of the Superannuation Guarantee (Administration) Act 1992 (Cth).

3. Payment Through Dividends

Dividends, or distributions, are paid to shareholders by the company using the profits the company has generated in a certain period. Directors are entitled to receive dividends if they hold shares that allow this. If a director is paid in dividends, the company does not have to pay the superannuation guarantee as dividends are not included in the calculations of OTE. There are, however, taxation consequences for a director and the company if the director is paid in dividends.

The company will need to pay tax on any profits made, and the director will receive a franking or imputation credit for tax the company paid when issuing the director with a dividend. If your personal tax total is less than the amount of the company’s tax total, the Australian Tax Office will refund you the difference. It is important to get tax advice from your accountant before receiving any dividends.

Key Takeaways

Directors are commonly remunerated through directors’ fees and payment through dividends. They will only receive a salary if they perform a role other than the company director. 

If you need advice about receiving payment for your services as a company director, call LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

Do Company Directors Get Paid?

Yes, company directors typically pay themselves a small amount for their services. You will typically be paid through a salary, directors’ fees or dividends.

How Are Company Directors Paid?

Company directors can be paid in several ways. If you are an employee as well as a director, you can receive a director’s salary. Alternatively, you can receive directors’ fees to compensate you for your services. Finally, you can receive payment through dividends if you are a shareholder.

Do Company Directors Have to Pay Superannuation?

Yes, superannuation applies to salary and fee payments made to company directors. However, superannuation does not apply to directors’ dividend returns. These are calculated using your ordinary time earnings.

Can Company Directors Receive Compensation for Expenses?

Yes, company directors can recover costs associated with your travel, meeting attendance or other expenses related to your role. This will be paid under directors’ fees.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Bianca Reynolds
Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • By submitting this form, you agree to receive emails from LegalVision and can unsubscribe at any time. See our full Privacy Policy.
  • This field is for validation purposes and should be left unchanged.
Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer
Privacy Policy Snapshot

We collect and store information about you. Let us explain why we do this.

What information do you collect?

We collect a range of data about you, including your contact details, legal issues and data on how you use our website.

How do you collect information?

We collect information over the phone, by email and through our website.

What do you do with this information?

We store and use your information to deliver you better legal services. This mostly involves communicating with you, marketing to you and occasionally sharing your information with our partners.

How do I contact you?

You can always see what data you’ve stored with us.

Questions, comments or complaints? Reach out on 1300 544 755 or email us at info@legalvision.com.au

View Privacy Policy