The short answer
Learn how to structure your salary when starting a business, including why a lower base wage and flexible income approach works best.
When you start a business, pay yourself a modest base wage and top it up later with bonuses or dividends once you know how the business is performing. Income in the early months is lumpy, and a high wage too early strains cash flow, increases super and PAYG withholding, and makes turning your wage on and off an admin headache. Keep a cash buffer and review quarterly.
Why not start on a big salary?
If you set a $100,000 wage in month one and the business has a slow quarter, you’ll be paying wages, super and withholding the business can’t afford. Larger wages also mean larger BAS payments, so your compliance costs become lumpier.
Why is turning your wage on and off a problem?
Stopping and starting wages creates extra payroll work and super obligations each time. From 1 July 2026, Payday Super means super must be paid at the same time as wages, so constant changes add more admin and risk of mistakes.
What’s a better approach?
Keep a buffer: hold some cash savings so a bad month doesn’t force changes.
Set a smaller base wage: enough to live on and that the business can reliably afford.
Top up later: pay a quarterly, six-monthly or annual bonus or dividend based on actual profit.
Review regularly: lift the base wage as revenue becomes predictable.
How does structure affect this?
Sole traders don’t pay themselves a wage at all; they draw profit and pay tax on it personally. Company owners can mix wages and dividends. The right mix depends on your tax position, so get advice.
A typical Melbourne scenario
Chloe left a corporate job to start a marketing consultancy in Prahran. Instead of matching her old $110,000 salary, she set a $60,000 base wage through her company and kept three months of expenses in savings. After a strong first six months, she paid herself a $20,000 dividend. Her cash flow stayed steady through a quiet summer, and her BAS stayed predictable.
Key takeaways
Start with a modest base wage the business can sustain.
Use bonuses or dividends to share profit once it’s real.
Avoid switching your wage on and off, especially with Payday Super.
Keep a cash buffer and review quarterly.
General information only. Talk to your accountant about your circumstances.
Read how to pay yourself as a business owner and do 50/50 partners need equal pay?, or talk to our business accountants.
Oz calls accounting "the great art", and his clients would agree. A CPA member and Xero specialist, he joined Elephant to provide a more holistic service that covers every base of building wealth. He believes long-term relationships are the only way to get clients real results. When he's not at his desk, he's at the gym, on his bike, or fishing - ideally all three.
