{"id":607,"date":"2009-02-20T08:22:24","date_gmt":"2009-02-19T22:22:24","guid":{"rendered":"http:\/\/wordconstructions.com.au\/blog\/?p=607"},"modified":"2012-01-02T11:11:22","modified_gmt":"2012-01-02T00:11:22","slug":"paying-yourself-and-profit","status":"publish","type":"post","link":"https:\/\/www.wordconstructions.com.au\/blog\/2009\/02\/paying-yourself-and-profit\/","title":{"rendered":"Paying yourself and profit"},"content":{"rendered":"

Yesterday, I wrote about the definition of profit<\/a>. As a small business owner (that is, a sole trader or partner rather than a company or trust,) how do you get paid – it is an expense or does it come from your profit?<\/p>\n

Depending\u00a0on how you have set things up, it could be either way, or even both.<\/p>\n

1. you pay yourself a salary\/wage<\/p>\n

If you pay yourself regularly as you would any employee, then your pay is an expense – as are the workers compensation, superannuation<\/a>, PAYG\u00a0and other employment expenses. Your pay is removed from your turnover before you calculate profit and your profits are in addition to your income.<\/p>\n

2. you don’t get paid a salary\/wage<\/p>\n

If you get money from your business on a less formal arrangement, such as only when there is enough money in the account or as you need it, you take drawings from your investment in the business. Drawings are not counted as an expense so they come out of your profits. The more profitable the business, the more money you can draw upon, but if there is little profit, you can’t access much.<\/p>\n

 <\/p>\n

\"Earning<\/a>Either way, your profits are there for use in the business or for you\u00a0to take as drawings and spend however you wish. The distinction is important in accounting terms for the following types of situations:<\/p>\n