Quick Summary: Company Money Extraction Methods
Company directors have five legitimate ways to access company funds: salary/wages, dividends, loan repayments, fringe benefits, and Division 7A loans. Each method has different tax implications, and choosing the wrong approach can trigger unfranked dividends with significant tax consequences.
Key methods for 2025:
- Salary/wages: Subject to PAYG withholding and superannuation
- Franked dividends: Includes tax credits to avoid double taxation
- Complying loans: Must meet Division 7A requirements with 8.37% interest rate
- Loan repayments: Tax-free if genuine loan to company
- Fringe benefits: Subject to FBT at 47% rate
Understanding these options is crucial because your company is a separate legal entity — taking money incorrectly can result in unfranked dividend treatment and substantial tax penalties. The stakes have never been higher with increased ATO scrutiny on Division 7A compliance.
Why You Can’t Just Take Money From Your Company
Let’s start with the fundamental truth that catches many business owners off guard: your company’s money isn’t actually your money, even if you’re the sole director and shareholder.
Your company is a separate legal entity under Australian law. This means the business bank account, assets, and profits belong to the company, not to you personally. While this structure provides asset protection and tax benefits, it also creates strict rules about how you can access those funds.
“The biggest mistake we see is business owners treating the company bank account like their personal wallet,” explains Patricia Wong, an ITP senior business tax advisor with 18 years of experience. “Even if you own 100% of the shares, you can’t just transfer money without proper documentation and tax consideration.”
The consequences of getting this wrong include:
- Unfranked dividends taxed at your marginal rate without tax credits
- Division 7A penalties and interest charges
- Potential director penalty liabilities
- ATO audits and increased compliance scrutiny
The Australian Taxation Office has significantly increased its focus on Division 7A compliance in 2025, with enhanced data matching and automated detection systems identifying suspicious transactions between companies and their directors. (Read more here about who the ATO is targeting for auditing this year.)
Method 1: Salary, Wages, and Director’s Fees
Paying yourself a regular salary or director’s fees is the most straightforward method to extract money from your company. This approach provides predictable income and is fully deductible to the company.
How it works:
- Company pays you as an employee or for director services
- PAYG withholding applies to ensure tax is paid
- Superannuation guarantee payments required (12% from July 2025)
- You report income in your personal tax return
Tax implications:
- Company claims full deduction for salary and super payments
- You pay tax at marginal rates (up to 47% including Medicare levy)
- Provides consistent cash flow and meets personal income requirements
“For most small business owners, a combination of modest salary plus dividends provides the best tax outcome,” notes David Chen, an ITP company tax specialist. “The salary covers living expenses and builds super, while dividends distribute profits tax-efficiently.”
When salary/wages work best:
- You need regular, predictable income
- Building superannuation is important for retirement planning
- Company has consistent monthly cash flow
- You want to minimise personal tax planning complexity
2025 considerations:
- Superannuation guarantee rate increases to 12% from 1 July 2025
- Single Touch Payroll reporting remains mandatory
- Consider salary sacrifice arrangements for additional super contributions
Method 2: Franked Dividends — The Tax-Efficient Option
Franked dividends are often the most tax-efficient way to distribute company profits because they include tax credits (franking credits) that eliminate double taxation of company profits.
How franked dividends work:
- Company pays 25% or 30% tax on profits (depending on company tax rate)
- Dividends are “franked” with credits equal to tax already paid
- You receive dividend plus franking credits in your tax return
- May receive refund if franking credits exceed your tax liability
Example calculation for 2025:
Company pays $30,000 dividend to shareholder:
- Company tax paid: $10,000 (assuming 25% rate)
- Dividend received: $30,000
- Franking credits: $10,000
- Total income to declare: $40,000
- Your tax on $40,000 (at 32.5% rate): $13,000
- Less franking credits: $10,000
- Additional tax payable: $3,000
“Franked dividends are incredibly powerful for retirees or low-income earners,” explains Jennifer Walsh, an ITP tax planning specialist with 20 years of experience. “We’ve had clients receive franking credit refunds of $15,000 or more annually through strategic dividend planning.”
Dividend requirements:
- Company must have retained earnings to pay dividends
- Distribution statements must be issued within four months
- Proper board resolutions declaring dividends required
- Franking account must have sufficient credits
Method 3: Loan Repayments — Tax-Free Recovery
How about making money back from your company for nothing? This is totally legitimate and something loads of people overlook! If you’ve previously lent money to your company, repayments of these loans are completely tax-free as they’re returning your own capital.
Key requirements:
- Original loan must be genuine and properly documented
- Clear records showing money advanced to company
- Repayments cannot exceed original loan amount
- Interest received is taxable income
Documentation essentials:
- Written loan agreements with terms and conditions
- Bank records showing transfers to company
- Board resolutions approving loan arrangements
- Loan account records in company books
“We see many family businesses where parents lent money during startup, for example, but never properly documented it,” says Michael Rodriguez, an ITP senior partner. “Proper loan documentation from day one saves significant tax complications later.”
Common scenarios:
- Startup capital provided by directors
- Emergency funding during cash flow difficulties
- Equipment purchases funded personally then reimbursed
- Working capital loans during business expansion
Interest considerations:
- Company can claim tax deductions for interest paid
- You must declare interest received as assessable income
- Consider market rates to avoid transfer pricing issues
Method 4: Fringe Benefits — Asset Use and Perks
Here’s another little misunderstood tax perk that you could be taking advantage of, if you’re not already. Fringe benefits allow you to access company assets or receive benefits with the company paying Fringe Benefits Tax (FBT) rather than you paying income tax.
Common fringe benefits:
- Company car for private use
- Home office equipment and furniture
- Professional development and training
- Accommodation and travel benefits
FBT calculation for 2025:
- FBT rate: 47% on taxable value of benefits
- Company pays FBT and claims deduction
- You don’t report fringe benefits as income (unless reportable)
- May be more tax-efficient than salary for certain benefits
Example: Company car
Company provides $50,000 car with 40% private use:
- Taxable value: $20,000 (40% of $50,000)
- FBT payable: $9,400 (47% of $20,000)
- Total cost to company: $9,400 vs potentially $18,800 if paid as salary to someone on 47% tax rate
“For high-income earners, fringe benefits can provide substantial tax savings,” notes Lisa Park, an ITP FBT specialist. “The key is ensuring benefits provide genuine value and meet the ‘otherwise deductible’ tests.”
Strategic considerations:
- Car fringe benefits using operating cost or statutory methods
- Expense payment benefits for otherwise deductible expenses
- Loan fringe benefits for low-interest loans to employees
Method 5: Division 7A Complying Loans
Need a big cash injection for personal uses? If you’ve got some cash tied up in your company, there’s a way to get your hands on those funds without paying the kinds of crazy interest rates you’d pay with a bank loan or a credit card!
Division 7A loans allow you to borrow money from your company without immediate tax consequences, provided you meet strict compliance requirements.
Current requirements for 2025:
- Interest rate: 8.37% (updated annually)
- Written agreement signed before company lodgment day
- Maximum 7 years unsecured (25 years if secured by property mortgage)
- Minimum annual repayments calculated using ATO formula
Loan agreement essentials:
- Parties clearly identified (company and borrower)
- Loan amount and purpose
- Interest rate and calculation method
- Repayment schedule and terms
- Security arrangements (if applicable)
Repayment options:
- Cash repayments: Transfer money from personal account to company
- Dividend repayments: Company declares dividend equal to required repayment
- Salary/wage deductions: Company retains portion of salary to repay loan
“Division 7A loans are fantastic for major purchases like property deposits or renovations,” explains Rebecca Foster, an ITP corporate advisory specialist. “But they require disciplined management and accurate record-keeping to avoid deemed dividend treatment, which is why it’s always best to consult with your tax specialist.”
Strategic advantages:
- Access large amounts without immediate tax
- Spread tax impact over loan term through dividend repayments
- Flexibility in repayment timing and methods
- Can be combined with family trust distributions for tax optimisation
Warning signs to avoid:
- Missing minimum annual repayments
- Using loan proceeds to make further loans to company
- Circular lending arrangements
- Inadequate documentation or record-keeping
What Happens When You Get It Wrong: Division 7A Penalties
Before you get too excited about it, be very, very careful you understand how this works — you don’t want to go causing harm to your business, costing yourself money, or worst of all, angering the tax man! Getting company money extraction wrong triggers Division 7A deemed dividend treatment — one of the most expensive tax mistakes Australian business owners make.
Deemed dividend consequences:
- Entire amount treated as unfranked dividend
- Taxed at your marginal rate (up to 47%) with no franking credits
- No deduction available to company
- Interest charges on unpaid tax
- Potential penalties for late payment
Real-world example:
A director takes $100,000 for personal home renovation without proper documentation:
- Deemed dividend: $100,000
- Tax at 47% rate: $47,000
- No franking credits available
- Compare to legitimate dividend: $47,000 tax minus $30,000 franking credits = $17,000
- Additional cost of getting it wrong: $30,000
Common Division 7A triggers:
- Using company credit cards for personal expenses
- Paying family expenses from company accounts
- Informal loans without written agreements
- Using company funds for private property purchases
- Providing assets to family members at below-market rates
“We see business owners make $50,000 mistakes because they used the company card for a family holiday,” warns Anthony Martinez, an ITP compliance expert. “The ATO’s data matching has become incredibly sophisticated — they’ll find these transactions. So, make sure you really understand what you’re doing, and keep the proper paperwork and records.”
2025 ATO enforcement trends:
- Increased data matching with banking institutions
- Automated detection of suspicious transaction patterns
- Focus on lifestyle audits for high-wealth individuals
- Enhanced penalties for repeated non-compliance
Strategic Planning: Optimising Your Money Extraction
They say life is all about balance, right? Likewise, the best approach to making money from your company legitimately and effectively combines multiple methods, to optimise your overall tax position and cash flow requirements.
Optimal extraction strategy for most small business owners:
- Base salary: Cover living expenses and super obligations
- Franked dividends: Distribute excess profits tax-efficiently
- Strategic timing: Pay dividends in low-income years
- Fringe benefits: Provide legitimate business benefits
- Division 7A loans: For major one-off expenses
Family trust structures:
Want to provide benefits to the whole family? Using a family trust as shareholder allows income streaming to different family members, helping them out while ensuring maximum tax efficiency for your company:
- Adult children at university (tax-free threshold: $18,200)
- Retired parents with low incomes
- Spouses with lower marginal tax rates
- Building adult children’s super through contributions
Cash flow management:
- Plan dividend timing around personal income needs
- Use loan accounts for temporary cash flow requirements
- Coordinate with family income to optimise tax brackets
- Consider multiple smaller dividends vs annual lump sums
“We’ve helped clients save $25,000+ annually through strategic family trust distributions,” shares Amanda Clarke, an ITP tax planning expert. “The key is understanding each family member’s complete tax situation and planning accordingly. We’ve helped many Aussies achieve the dreams they had when they started their companies in the first place — to run a great business, provide for their families, and secure their future.”
FAQs: Your Company Money Questions Answered
Can I take money out if my company is making losses?
You can take salary and loan repayments even during loss periods, but dividends require retained earnings. Consider whether continued losses indicate the need for additional capital injection.
What’s the difference between Division 7A and Division 7B?
Division 7A applies to private companies making payments to shareholders. Division 7B (not commonly used) applies to certain liquidation distributions.
Can I use a company credit card for personal expenses?
Only if properly documented as a loan or reimbursable expense. Personal use without documentation triggers Division 7A deemed dividend treatment.
How does Division 7A apply to family trusts?
If your company is a beneficiary of a family trust with unpaid entitlements, Division 7A may apply to benefits provided to shareholders.
What happens if I miss Division 7A loan repayments?
The shortfall is treated as an unfranked dividend. You must include it as assessable income and pay tax at marginal rates.
Can I forgive a Division 7A loan?
Loan forgiveness is treated as a dividend. The company must have sufficient franking credits to frank the forgiven amount, or it becomes an unfranked dividend.
Company Money Extraction Checklist
We know that there’s a lot to wrap your head around when you’re running a company, and making money out of your company isn’t as simple as it might have sounded when you decided to start it up. Getting these things wrong can not only cost you money and put the profitability of your company in jeopardy, it can also mean serious consequences from the ATO. But don’t worry, we’ve put together a quick checklist to help. (Use this to better understand how to make money out of your company, but always consult a tax professional before you make any decisions.)
Before taking money from your company:
- Determine the most tax-efficient extraction method for your situation
- Ensure proper documentation and board resolutions are in place
- Calculate tax implications for both company and personal returns
- Consider timing to optimise family income distribution
- Review compliance with Division 7A requirements
For Division 7A loans specifically:
- Prepare written loan agreement before company lodgment day
- Set up loan account in company books
- Calculate minimum annual repayments using ATO formula
- Establish repayment method (cash, dividend, or salary deduction)
- Monitor compliance throughout loan term
Annual review requirements:
- Assess whether current extraction strategy remains optimal
- Review family trust distribution opportunities
- Update loan agreements for interest rate changes
- Ensure all transactions are properly documented
- Plan upcoming year’s extraction strategy
Professional Support for Company Money Management
Company money extraction involves complex tax rules where mistakes can be extremely expensive. Professional guidance ensures you maximise tax efficiency while maintaining full compliance.
At ITP, our experienced company tax specialists have helped thousands of business owners optimise their money extraction strategies over our 50+ years in practice. We understand the intricate balance between accessing your money and minimising tax.
Our company advisory services include:
- Strategic extraction planning for directors and shareholders
- Division 7A loan documentation and compliance monitoring
- Family trust structure optimisation and income streaming
- FBT planning and compliance for fringe benefits
- ATO audit support and representation for Division 7A issues
Consider professional help when:
- Your company generates significant profits requiring extraction planning
- You’re considering major personal purchases requiring company funds
- Family members are involved in the business requiring trust structures
- You’ve received ATO attention regarding Division 7A compliance
- Your current strategy isn’t optimised for changing tax legislation
“The investment in proper tax planning typically pays for itself many times over,” says Peter Williams, an ITP senior partner with 25 years of experience. “We’ve seen clients save $50,000+ annually through strategic extraction planning, while others have avoided six-figure Division 7A penalties through proper compliance.”
Ready to optimise your company money extraction strategy? Contact your nearest ITP office to speak with a qualified company tax specialist who understands the complexities of Australian corporate tax law and can develop a tailored strategy for your situation.
Making Your Company Work for You
Understanding how to properly extract money from your company is crucial for any business owner operating through a corporate structure. While the rules may seem complex, the benefits of getting it right are substantial — both in terms of tax savings and asset protection.
The key to success lies in planning ahead, maintaining proper documentation, and seeking professional advice when needed. With the ATO’s increased focus on Division 7A compliance in 2025, ensuring your money extraction strategy is bulletproof has never been more important.
Whether you’re accessing funds for living expenses, major purchases, or investment opportunities, there’s a legitimate, tax-effective way to do it. The investment in proper planning and compliance will pay dividends for years to come, literally and figuratively.
Remember, your company is one of your most valuable assets. Using it strategically to access funds while building wealth for the future is what smart business ownership is all about.
Other helpful articles:
Top 2025 Tax Offsets You Might Be Missing in Australia
ATO Hit List 2025: Top Audit Targets This EOFY & How to Stay Compliant
Work Travel Expenses 2025 Tax Return: Complete ATO Guide
Company Tax Rates Australia 2025: Complete Guide
Disclaimer: This article provides general information about company money extraction methods and should not be considered personal tax advice. Division 7A and corporate tax laws are complex and individual circumstances vary significantly. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your business structure and needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.