Can a Director Receive a Salary and Directors' Fees?
Published May 25th, 2026 | Team Gimbla
Yes. In Australia, the same person can be a company director, shareholder and employee, so a director may receive salary for work in the business and directors’ fees for director duties. The important part is not whether both labels can exist. It is whether the payments are properly authorised, processed through payroll, reported to the ATO and recorded in the accounts.
For most small companies, salary and directors’ fees should not be treated as casual owner drawings. They normally sit inside the payroll and tax workflow: PAYG withholding, Single Touch Payroll (STP), superannuation review, payslips or payment records, BAS reporting and bookkeeping entries.
A director can wear more than one hat. Payroll should make those hats visible instead of blending every payment into one vague owner transfer.
Quick answer
An Australian company director can usually receive both salary and directors’ fees if there is a real basis for each payment. Salary or wages usually relate to the director’s employee or operational work. Directors’ fees usually relate to the director’s role as a company director, board member or person performing director duties.
The ATO’s guidance on using business money and assets for private purposes says a person can be an employee, director and shareholder of the company operating the business, and that salary, wages and directors’ fees received from the business are assessable income for the individual. It also says the business must register for PAYG withholding, withhold from salary, wages and directors’ fees, and report PAYG withholding information in its BAS.
So the practical answer is: yes, but do it deliberately. Do not pay a director extra money, call it fees later and hope the records catch up.
Key points
- A director can receive salary for employee-style work and directors’ fees for director duties.
- Both payment types usually need PAYG withholding, STP reporting and payroll records.
- The ATO’s STP Phase 2 guidance says directors’ fees are reported separately from ordinary gross amounts.
- Directors’ fees are generally salary and wages and ordinary time earnings for super guarantee purposes.
- A company director should not treat company money like sole trader drawings.
Salary, directors’ fees and other owner payments
The cleanest first step is to name what the payment is actually for. A founder-director might do three different things for the same company: work in the business, govern the company and own shares. Those roles can lead to different payment types.
| Payment type | What it usually means | Payroll and bookkeeping treatment |
|---|---|---|
| Salary or wages | Payment for employee-style work, management work or operational duties | Run through payroll, with PAYG withholding, STP and super review |
| Directors’ fees | Payment for serving as a director, attending meetings or performing director duties | Run through payroll, with separate STP Phase 2 categorisation |
| Dividend | Distribution to shareholders from company profits | Record as an equity distribution, not wages or a payroll expense |
| Director loan | Money owed between the director and the company | Track on the balance sheet and review carefully with an adviser |
Business.gov.au explains in its sole trader versus company comparison that, in a company structure, the company may pay a director salary, wages or directors’ fees, but the director cannot simply withdraw company money as personal drawings.
That distinction matters for bookkeeping. Salary and directors’ fees affect payroll expenses, PAYG withholding, super liabilities and STP records. Dividends affect equity and shareholder records. Director loans affect the balance sheet. Mixing those categories makes reports harder to trust and can create tax problems.
How the ATO treats directors’ fees in payroll
For STP Phase 2, directors’ fees are not just another anonymous gross payment. The ATO’s disaggregation of gross guidance says directors’ fees must be separately included in STP Phase 2 reports.
That means a pay run for a working director may need two clear pay items:
- salary or wages for ordinary employee-style work
- directors’ fees for director duties
The company should withhold PAYG from both where required, keep payroll records and report the year-to-date amounts through STP. At BAS time, the withheld PAYG should also flow into the activity statement workflow.
If you are new to the reporting layer, start with Gimbla’s guide to what Single Touch Payroll is and the PAYG Withholding glossary page.
What about super on directors’ fees?
Directors’ fees can also matter for super. The ATO’s ordinary time earnings list includes directors’ fees and shows remuneration paid to working and non-working directors as salary and wages and ordinary time earnings for super guarantee purposes.
In plain English, do not assume directors’ fees escape super just because the person is a director. For a typical Australian company payroll workflow, directors’ fees should be reviewed for Superannuation Guarantee, just like salary and wages.
If the director has unusual residency, contractor, board, trust, foreign-service or related-party facts, get advice before relying on a simple rule. The answer can change when the arrangement is not a straightforward Australian company paying an individual director.
Simple example
Imagine a small Australian company has one founder-director. During May 2026, the director does regular business work and also receives a fixed fee for director duties. The company decides to pay both amounts in the same monthly payroll.
| Pay item | Amount |
|---|---|
| Salary for operational work | $8,000 |
| Directors’ fees for director duties | $2,000 |
| Total payroll amount to review | $10,000 |
The payroll review should then calculate PAYG withholding, check super, produce the payroll records and report the amounts through STP in the right categories. The bookkeeping should show the expense, the bank payment, the PAYG withholding liability and any super liability clearly.
What to check before paying both
Before a director receives both salary and directors’ fees, check the commercial and compliance support around the payment.
Is each payment for a real role?
Salary should connect to work performed in the business. Directors’ fees should connect to director duties. If the same work is being paid twice under two labels, pause and ask your accountant or lawyer how it should be structured.
Has the company approved the payment?
Director remuneration should line up with the company’s constitution, replaceable rules, shareholder approvals or director resolutions where relevant. Keep the decision record with the company records, especially in related-party situations.
Is the payroll setup clear?
Use separate pay items for salary and directors’ fees. That makes STP categorisation, payroll reports, super review and year-end reconciliation easier.
Has super been reviewed?
Directors’ fees are commonly superable. Check the current Superannuation Guarantee treatment, especially if the director also receives salary, bonuses, allowances, reimbursements or salary sacrifice.
Is it really payroll, not a dividend or loan?
If the payment is a return on shares, it may be a dividend. If money has already moved without payroll, dividend or expense records, it may be sitting in a director loan account. Do not fix that by renaming the transfer after the fact without advice.
Common mistakes
Calling every owner payment a director fee
Directors’ fees should describe director duties, not every transfer to a founder. If the director is being paid for ordinary work, salary or wages may be the clearer label.
Forgetting STP Phase 2 categories
STP Phase 2 asks for more detail than old gross payroll reporting. Directors’ fees should be mapped as directors’ fees, not buried in a broad wage category.
Ignoring super
The director’s title does not remove the super question. Review directors’ fees for ordinary time earnings and salary-and-wages treatment.
Treating a company like a sole trader
A sole trader can draw from the business because they and the business are not separate legal entities. A company is different. Company money belongs to the company until it is paid, loaned or distributed properly.
Backdating the story
If a payment was made months ago, do not just pick the most convenient label at year end. Reconstruct what actually happened, then ask an adviser how to correct the records.
How Gimbla fits the workflow
In Gimbla, the practical workflow is to keep the payroll and accounting records close together:
- set up the director as an employee or payee where payroll reporting is required
- create separate pay items for salary and directors’ fees
- review PAYG withholding and super before approving the pay run
- lodge STP through the payroll workflow
- reconcile the bank payment
- review payroll expenses, PAYG withholding and super liabilities in the accounts
Useful next reads:
- Payroll for Small Business in Australia
- Single Touch Payroll
- Superannuation Guarantee
- Create an employee
- Register your software ID for STP
- How to Record a Dividend Payout in Australia
- Recording Personal Expenses: Company vs Sole Trader
Frequently asked questions
Can a company director receive both salary and directors’ fees?
Yes, but the company should be able to explain why each amount exists. Salary usually relates to employee-style work. Directors’ fees usually relate to director duties. Both should be processed through the right payroll, tax and accounting workflow.
Are directors’ fees treated like payroll in Australia?
Usually yes. Directors’ fees are generally subject to PAYG withholding, reported through STP Phase 2 as directors’ fees, and treated as salary and wages and ordinary time earnings for super guarantee purposes.
Can a director take drawings from a company instead?
No. Company money is not the same as sole trader money. A director or shareholder payment should be recorded as salary, directors’ fees, a dividend, a loan repayment, a reimbursement or another properly supported transaction.
Should directors’ fees be paid as a dividend?
Not if the payment is remuneration for director duties. Dividends are shareholder distributions, while salary and directors’ fees are payments for work or office-holder duties. If the same person is both director and shareholder, keep the two ideas separate.
In short
A director can receive salary and directors’ fees, but the records need to show what each payment is for. Treat salary as payroll for work in the business, treat directors’ fees as payroll for director duties, check PAYG withholding, STP and super, and keep dividends or director loans in their own lanes.