Directors' fees¶

Directors' fees are amounts a company pays to one of its directors for performing their role as a director. This is different from wages paid for other work the person might do for the business. Directors' fees are the payment for being a director — things like attending board meetings and making decisions about the company.

The Australian Taxation Office (ATO) treats directors' fees as a distinct kind of payment. In most cases the company must take out PAYG withholding — the tax an employer holds back and sends to the ATO — and super may also apply. Because the rules depend on the situation, always check the details with the ATO.

In one line

Directors' fees are amounts paid to a company director for their role. The ATO treats them as a distinct payment — PAYG withholding generally applies, and super may apply.

Why this matters¶

If you run a company and pay yourself or another person for being a director, that payment has its own tax and reporting treatment. Knowing directors' fees are handled differently from ordinary wages helps you set the payment up correctly and keep the company's records right.

What you will learn¶

What directors' fees are
That the ATO treats directors' fees as a distinct payment
That PAYG withholding generally applies and super may apply

Understanding the concept¶

A director is a person appointed to help run and make decisions for a company. A company can choose to pay a director a fee for that role. That fee is a directors' fee.

The ATO lists directors' fees among the payments a company generally has to withhold tax from. So, like wages, the company usually takes out PAYG withholding on the fee and sends it to the ATO.

Super can also apply. The ATO explains that fees paid to a company director are generally treated as ordinary time earnings — the earnings super is worked out on. Whether super applies in a particular case can depend on the arrangement, so this is one to confirm with the ATO or a professional for your own situation.

Directors' fees are also reported to the ATO in their own right. Under the current Single Touch Payroll (STP) reporting rules, directors' fees are shown separately, not lumped in with ordinary wages.

For accountants & bookkeepers

The ATO groups directors and office holders with employees for PAYG withholding. For super, the ATO's ordinary-time-earnings ruling treats fees paid to a company director as earnings for their ordinary hours. Under STP Phase 2, directors' fees are itemised as their own payment type rather than reported as plain gross. The treatment can turn on the facts of the arrangement, so verify against the ATO rather than assuming.

Example¶

A small company appoints Jordan as a director and agrees to pay a directors' fee for that role. When the company pays the fee, it takes out PAYG withholding using the ATO rules and sends that amount to the ATO. The fee is reported to the ATO as a directors' fee. The company checks whether super applies to the payment and handles it accordingly.

Common mistakes¶

Treating a directors' fee as if no tax needs to be withheld — PAYG withholding generally applies.
Reporting directors' fees as ordinary wages — the ATO expects them shown separately.
Assuming super never applies to directors' fees — it often does. Check with the ATO.

How this works in myaccountant¶

In the app — directors' fees are set up as their own pay item, separate from ordinary wages. When you run the pay, myaccountant works out the PAYG withholding for you and the fee appears on the payslip. The fee is reported to the ATO under the correct payment type.

Key points¶

Directors' fees are paid to a company director for performing their role.
The ATO treats them as a distinct kind of payment.
PAYG withholding generally applies to directors' fees.
Super may apply — directors' fees are generally ordinary time earnings.
Directors' fees are reported to the ATO separately from ordinary wages.
Confirm the details for your situation with the ATO or a professional.

Learn next¶

General information only — not tax, super or financial advice.

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