Director fees and dividends

 Author: sammychau202(Initiate)Initiate

30 June 2024

Hi,

I'm one of the two directors of a small company (annual turnover of just over $100k). We both receive monthly wages because we work for the business. Sometimes we also pay ourselves Director Fees (once or twice a year). We're on cash accounting basis, we don't have any creditors or debts (except for PAYG and GST liabilities but we'll pay after BAS lodgement). I have a couple of questions:

1. If after lodging tax return and we pay company income tax, we want to split the all profits after tax, will that be considered franked dividends rather than director fees? The reason because if we consider it as director fees which we pay personal income tax on, it looks like we pay taxes twice on the same income
2. If after sharing the profits after tax, we get more revenues from our customers in the new financial year and decide to pay us an amount of money, will this then need to be considered as Director Fees?
3. In general, what makes a difference between Director fees and dividends? Given the company has only two directors and we need to split the $ from time to time which we both agree on.

Thank you

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