Two Ways to Take Profit, With Different Super Consequences
Taking profit from your own company as a wage or as a franked dividend produces broadly similar income tax outcomes, because dividend imputation credits you for the company tax already paid. What differs is everything around it: a wage attracts Superannuation Guarantee and counts towards the concessional cap, and a dividend does neither.
- The answer: Imputation makes the total tax on a franked dividend broadly similar to a wage at the same marginal rate. The differences are in super and administration.
- The trap: A dividend attracts no Superannuation Guarantee, so an owner paying themselves entirely in dividends is contributing nothing to super without noticing.
- The recommendation: Take enough salary to support the super contributions you want, and use dividends for the rest if that suits the business.
Where the AI summary above gets this wrong
"Paying yourself in franked dividends instead of a wage saves tax."
That's surface-true. Here's what it misses:
- Imputation makes the income tax broadly neutral — The company tax already paid is credited against your liability, so the total tax on a dollar of profit is similar either way at the same marginal rate.
- The real differences are super and obligations — A wage attracts Superannuation Guarantee and counts towards the concessional cap; a dividend does neither, and an owner paid only in dividends accumulates no super.
01 Why the tax is broadly neutral
A company pays tax on its profit and attaches franking credits to the dividends it pays from that profit. Your assessable income includes the dividend plus the credit, and the credit is applied against the tax on it.
The result is that a dollar of profit distributed as a franked dividend bears close to your marginal rate in total, which is the same outcome as a dollar paid as a wage. The imputation system is designed to produce exactly that.
Timing differences are the exception. A wage is taxed as it is paid; profit retained in the company is taxed at the company rate and the top-up is deferred until it is distributed, which is a deferral rather than a saving.
02 What actually differs
Superannuation Guarantee is payable on a wage and not on a dividend. An owner paying themselves entirely in dividends receives no employer contribution at all, which is the largest practical difference and the easiest to overlook.
Only a wage supports employer contributions above the guarantee, which are deductible to the company — the route described in the company super post. A dividend cannot fund one.
Administration differs too: a wage requires payroll, withholding, single touch payroll reporting and workers compensation, and a dividend requires a dividend statement and adequate franking credits.
Shows: the after-tax amount from a dollar of company profit taken as a wage against taken as a franked dividend, at your marginal rate. Ignores: Superannuation Guarantee payable on a wage, payroll tax, the Medicare levy, and the deferral available by retaining the profit.
Source: ATO — Dividends
03 Where each is used
A wage sized to support the super contributions you want is the usual base, because that is the only way to get employer contributions and to use the concessional cap.
Dividends handle the rest where the business's cash flow suits them, and they are also how a non-working shareholder — commonly a spouse — receives a share of the profit, since a wage would require actual work.
Franking credit availability is the constraint on dividends. A company can only frank to the extent it has paid tax, and distributing unfranked dividends removes the imputation benefit entirely.
The tax question is close to a wash and the super question is not. An owner paid entirely in dividends for fifteen years has no employer contributions, no concessional cap used, and a balance to match. Take enough salary to fill the cap, and use dividends for whatever is left over.
FAQ
Should I pay myself a wage or franked dividends from my company in semi-retirement?
The income tax is broadly neutral because imputation credits you for the company tax already paid. Take enough salary to support the super contributions you want, and use dividends for the rest.
Does a dividend attract superannuation?
No. Superannuation Guarantee is payable on a wage and not on a dividend, so an owner paying themselves entirely in dividends receives no employer contribution at all.
How are retained profits taxed when I eventually draw them?
At the company rate when earned, with a top-up to your marginal rate when distributed as a franked dividend. Retaining profit defers the top-up rather than avoiding it.
Sources
Regulator references
- ATO — Franking credits on your dividends · Australian Taxation Office · 2026Franking credits: how the imputation credit is grossed up and offset against tax.Last verified: 2026-09-07
- ATO — Dividends · Australian Taxation Office · 2026How dividends are taxed in Australia and what must be declared.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
Run this rule against your situation
See what this rule does to your own projection — month by month, to age 90.
Join the Waitlist
Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.