How Much Should You Pay Yourself? NZ Shareholder Salary Guide

If you own and operate a New Zealand company, the question of how much to pay yourself comes up every year. Unlike employees who receive a fixed salary, owner-operators have flexibility in how they extract money from their company, and that flexibility creates a significant tax planning opportunity. The shareholder salary is a tax mechanism that allows you to allocate a portion of company profits to yourself as assessable income, reducing the company's taxable profit in the process. Getting the number right can save you thousands of dollars a year.

How Shareholder Salaries Work

A shareholder salary is not the same as a regular employment salary paid through PAYE. It is an end-of-year allocation: a portion of the company's profit that is treated as income of the shareholder rather than the company. The company claims a deduction for the amount, and the shareholder includes it in their personal tax return.

The key benefit is the difference between the company tax rate (28%) and personal tax rates. If your personal marginal rate on additional income is lower than 28%, it makes sense to allocate more profit as shareholder salary. If your personal rate is higher than 28%, you want to retain more profit in the company. The crossover point is approximately $70,000–$78,000 in total personal income, where the marginal rate reaches 30%. Above $180,000, the top personal rate is 39%.

The Optimisation Zone: $38,000–$180,000

The sweet spot for shareholder salary planning typically falls between $38,000 and $180,000 in total personal taxable income. Below $38,000, you are in the lower tax brackets (10.5%–17.5%) and should allocate as much income as possible at those rates. Between $48,001 and $70,000, you pay 30%, still slightly above the company rate. Between $70,001 and $180,000, you pay 33%. Above $180,000, you pay 39%.

For a typical owner-operator with no other income, the optimal shareholder salary is often between $70,000 and $110,000. At this level, you take advantage of the lower personal tax brackets on the first $70,000, accept the 33% rate on the portion between $70,001 and the shareholder salary amount, and retain the remaining profit in the company at 28%. The exact optimal figure depends on your total income from all sources, available deductions, and personal circumstances.

“The difference between an optimised shareholder salary and a poorly set one can be $5,000–$15,000 in tax per year. Over a decade, that is a house deposit.”

Key Factors That Affect the Calculation

Other Personal Income

If you have rental income, investment income, or income from other sources, your shareholder salary needs to account for these. Your marginal tax rate is based on your total taxable income from all sources, not just the shareholder salary. Someone with $30,000 in rental income will hit the higher brackets sooner and should set a lower shareholder salary than someone with no other income.

Working for Families and Other Credits

Working for Families tax credits are income-tested. Setting your shareholder salary too high can reduce or eliminate your entitlement. If you have dependent children and your family income is between $42,700 and approximately $100,000, the shareholder salary decision has a direct impact on your WFF entitlement. This is one reason blanket advice does not work. You need to model the actual numbers.

ACC Levies

Your shareholder salary affects your ACC earner levy. Higher shareholder salaries mean higher ACC levies. While this is a cost, it also means higher ACC cover if you are injured and cannot work. Some business owners deliberately set their shareholder salary at a level that provides adequate ACC cover while minimising overall tax. This is a legitimate planning consideration.

Student Loan Repayments

If you have a student loan, your shareholder salary affects your repayment obligations. The repayment threshold is $22,828 (2025–2026), and the rate is 12% on every dollar above that threshold. Setting a higher shareholder salary means faster repayment but also more cash leaving your pocket. This is a trade-off, not necessarily a problem.

Common Mistakes

• ●Setting the shareholder salary at exactly the company profit. This means you are paying the top personal rate on all of it, with no benefit from the 28% company rate
• ●Setting it too low to avoid tax. This can trigger the company's shareholder current account to grow, which creates its own tax complications
• ●Forgetting to account for other income sources when calculating the optimal amount
• ●Not adjusting the shareholder salary year-to-year as income changes. What was optimal last year might not be optimal this year
• ●Confusing shareholder salary with actual cash drawings. The shareholder salary is a tax allocation, your drawings are separate

Shareholder Current Accounts

Your shareholder current account tracks the balance between what the company owes you and what you owe the company. If you draw more cash from the company than your allocated shareholder salary, the current account goes into debit, and the company may be treated as having provided you with a loan. If that loan exceeds $10,000 at any point during the year, the company must calculate and return deemed interest under the prescribed rate, currently around 8.53% for the 2025–2026 income year.

This is one of the most common compliance issues we see with owner-operated companies. The fix is usually straightforward: set the shareholder salary at the right level and monitor drawings throughout the year. But the consequences of getting it wrong include additional tax, use-of-money interest, and potential penalties.

When to Get Help

If your company profit is straightforward and you have no other income, a basic shareholder salary calculation is manageable. But if you have rental properties, a working spouse, investment income, student loans, Working for Families credits, or multiple companies, the interactions between these factors make the calculation complex enough that getting professional advice will almost always pay for itself in tax savings.