Salary & Dividends
Maximise the return from your work
Most contractors choose to pay themselves a modest salary,
leaving the bulk of earnings in the company's bank account.
You will be liable to pay Income Tax and Workers Compensation
Insurance on the salary that you draw. Most contractors draw
dividends on a monthly or quarterly basis from earnings in the
company bank account. Your company must submit accounts to the
Australian Tax Office every calendar quarter showing both the
dividends and the tax it has paid.
Substantial savings can be made by drawing the bulk of your
income from dividends. Workers compensation insurance is not payable
on dividends and you can reduce the rate of tax you are liable for
by paying dividends to your co-director or company secretary.
Accountants estimate that a contractor can save about 10%
compared to a PAYE employee on a salary of $75,000, and if dividends
can be offloaded to a spouse shareholder so that neither reaches the
highest tax band, even larger savings can be made.
Disclaimer: This
information is of a general nature and is not to be construed as
financial advise. All facts contained therein represent the
understanding of these matters by Infopeople as at the publishing
date of this web site.
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