- Directors’ fees are a distinct form of remuneration from salary and dividends, subject to PAYG withholding and 12% super, and generally tax deductible for the company when commercially reasonable and backed by a board resolution passed before 30 June.
- There is no statutory minimum or maximum directors’ fee in Australia. The amount is set by the board, but fees that are disproportionate to the director’s actual contribution or structured primarily to shift income attract Part IVA scrutiny from the ATO.
- A board resolution is not optional. Paying a director without one creates deemed dividend or Division 7A loan risk, both of which remove the company’s deduction entitlement and can result in significant back-tax liabilities.
Directors’ fees are payments made to a company director for their services in governing the company. They are distinct from salary and dividends, subject to PAYG withholding, and generally tax deductible for the company when properly documented.
If you have just registered a company in Australia and are deciding how to pay yourself, a foreign-owned company appointing a resident director, or a business formalising its board, the structure you choose has real consequences for tax, super, and cash flow.
This guide covers:
- What directors’ fees are,
- How much is commercially reasonable,
- The tax and super obligations that apply,
- How to document and pay fees correctly, and
- What nominee director fees cost in Australia.
Before setting directors' fees for the year, check whether your company constitution contains a remuneration cap for non-executive directors. If the total fees across all directors exceed that cap, shareholder approval via an ordinary resolution is required before the board resolution is passed, not after.
What are directors’ fees in Australia?
Directors’ fees are payments made to a director of a company for the services they perform in their capacity as a director, that is, for governing the company, attending board meetings, fulfilling fiduciary duties, and overseeing management. They are not payments for performing operational work within the business.
This distinction matters legally and for tax purposes.
- A director who also works in the business as an employee receives two separate forms of remuneration: a salary or wages for their operational role, and directors’ fees for their board-level governance role.
- Conflating the two creates compliance problems with the ATO and potential issues with the Corporations Act.
Directors’ fees are governed by:
- The Corporations Act 2001: which sets the framework for director remuneration, shareholder approval requirements, and the prohibition on directors setting their own remuneration without proper authority.
- ATO Taxation Ruling IT 2534: which is the primary ATO guidance on the tax treatment of directors’ fees, bonuses, and similar payments.
- The company’s constitution: which may set a cap on the total remuneration pool available to non-executive directors, requiring shareholder approval to exceed it.
Directors’ fees are not the same as:
- Salary or wages: paid under an employment contract for operational work, subject to the same PAYG withholding but governed by employment law rather than the Corporations Act.
- Dividends: distributions of after-tax company profits to shareholders, requiring distributable retained earnings and a dividend declaration, not a board resolution on fees.
- Contractor payments: payments to a director who provides services through a separate entity such as their own company or trust; these are treated differently for GST and super purposes.
Read more: How to Pay Yourself as a Business Owner in Australia: Salary, Dividends & Tax Explained
How much can a director be paid in Australia?
There is no statutory minimum or maximum directors’ fee in Australia. The Corporations Act does not prescribe a rate. The amount is determined by the board, subject to two constraints: any cap on total non-executive director remuneration set in the company constitution, and the commercial reasonableness test applied by the ATO when assessing deductibility.
Typical directors’ fee ranges for private companies
For private companies, directors’ fees vary significantly by company size, the director’s involvement, and the nature of the role. As a practical reference point:
|
Company type and director role |
Typical annual fee range |
|
Small Pty Ltd, sole director, minimal governance activity |
$0 to $30,000 |
|
Small to medium Pty Ltd, non-executive director |
$20,000 to $60,000 |
|
Medium Pty Ltd, active non-executive director with committee responsibilities |
$40,000 to $100,000 |
|
Nominee or resident director, statutory compliance role only |
$6,000 to $20,000 |
|
Resident director with active operational oversight |
$12,000 to $40,000 |
These are indicative ranges based on current market practice. They are not prescribed by any legislation and should not be treated as a safe harbour. The appropriate amount depends on the specific duties performed, time commitment, and the commercial context of the company.
What does the ATO consider a reasonable directors’ fee?
The ATO assesses directors’ fees against a commercial reasonableness standard when determining deductibility. Fees that are grossly disproportionate to the director’s actual contribution, or that appear to be structured primarily to shift income to a lower-taxed individual, attract scrutiny under Part IVA of the Income Tax Assessment Act 1936.
The practical safeguards are:
- Document the director’s specific duties and time commitment in the board resolution
- Set fees at a rate that reflects what an arm’s length party would pay for equivalent governance services
- Do not set fees significantly above market rates for the size and complexity of the company
- Ensure fees are actually paid, not just resolved, an unexecuted resolution without genuine intention to pay is a specific ATO red flag under Taxpayer Alert TA 2011/4
Do you need a board resolution for directors’ fees?
A board resolution is the legal authority for paying directors’ fees. Without one, a payment to a director has no proper authorisation and may be treated as an unfranked dividend or a Division 7A loan, both of which have adverse tax consequences. The resolution must specify the amount, the period it covers, and confirm it falls within any remuneration cap set by the constitution.
Directors’ fees vs salary vs dividends: What’s the difference?
This is the question most founders and accountants are actually trying to answer. Each structure has different consequences for PAYG withholding, superannuation, tax deductibility, and flexibility. The right answer depends on your company’s profitability, your personal tax position, and your cash flow requirements.
The table below sets out the key differences. This is general information, not tax advice. The optimal structure for your specific situation requires professional advice from a registered tax agent.
|
Factor |
Directors’ fees |
Salary / wages |
Dividends |
|
PAYG withholding required? |
Yes |
Yes |
No |
|
Super guarantee applies? |
Yes, generally (s12 SGAA; directors remunerated for duties) |
Yes |
No |
|
Tax deductible for the company? |
Yes (if commercially reasonable) |
Yes |
No |
|
Requires board resolution? |
Yes |
No (employment contract sufficient) |
Yes (dividend declaration) |
|
Requires distributable profits? |
No |
No |
Yes |
|
Employment contract needed? |
No |
Yes |
No |
|
FBT exposure? |
No (cash payment) |
Possible (if benefits provided) |
No |
|
Flexibility of timing? |
High (set by board resolution) |
Low (regular pay cycle) |
Medium (declared as profits allow) |
Directors’ fees suit non-executive directors and founders who want flexibility in timing without the obligations of an employment relationship.
- They are deductible for the company and create a personal income tax liability for the director.
- Super at 12% generally applies.
Salary is appropriate for executive directors who perform day-to-day operational roles.
- It provides certainty for the director and the company but comes with employment law obligations including leave entitlements, notice periods, and payroll obligations.
- Super at 12% applies.
Dividends distribute after-tax company profits to shareholders and can be franked with company tax credits, which can be tax-efficient for the recipient depending on their marginal rate.
- However, they require distributable retained earnings, do not reduce company taxable income, and cannot be paid in a loss year.
- They are not a substitute for fees or salary where the director is actually providing services to the company.
Many private company directors use a combination of salary and dividends, or fees and dividends, depending on the company’s profitability and their personal tax position. Structuring remuneration primarily as dividends to avoid PAYG withholding and super obligations is a known ATO risk area under Part IVA, particularly where the director is the primary income-generating individual in the company.
Are directors’ fees tax deductible?
Yes, directors’ fees are generally tax deductible for the company in the year they are paid or in the year the company becomes definitively committed to paying them.
When can a company claim directors’ fees as a tax deduction?
For a directors’ fee to be deductible the company must:
- Have passed a board resolution before the end of the income year creating an unconditional commitment to pay a specific, quantified amount
- Actually pay the fees, or have a genuine and documented intention to pay them within a reasonable timeframe
- Be able to demonstrate the fees are commercially reasonable for the services performed
- Be incurring the expense in the course of earning assessable income
Why board resolutions matter for tax deductions
The board resolution is the mechanism that creates the deductibility entitlement. A resolution passed before 30 June that commits the company to paying a specific fee amount for the year is sufficient to claim the deduction in that year, even if the cash payment occurs after year end. This is a legitimate planning tool used by many Australian private companies.
However, this only works where the commitment is genuine. The ATO’s Taxpayer Alert TA 2011/4 specifically targets arrangements where a company passes a resolution for directors’ fees with no genuine intention to ever pay them, solely to generate a company tax deduction. Where this is found, the deduction is denied, Part IVA may apply, and the arrangement may be treated as a tax exploitation scheme.
When can directors’ fees trigger ATO scrutiny?
Part IVA of the Income Tax Assessment Act 1936 is the general anti-avoidance rule. It applies where a scheme is entered into for the dominant purpose of obtaining a tax benefit. In the context of directors’ fees, the ATO has identified the following higher-risk scenarios:
- Fees paid to a director at a rate substantially above market for a closely held company where the director is also the primary shareholder
- Fees structured to split income to a lower-taxed associate, particularly where the remuneration is not commensurate with the services actually provided
- Fees resolved but never paid, used purely to generate a company tax deduction
If in doubt about whether your directors’ fee arrangements are commercially reasonable and defensible, a review by a registered tax agent is worthwhile before year end.
A nominee director has the same personal liability as any other director under the Corporations Act, regardless of what the deed of indemnity says. An indemnity is only as valuable as the company's ability to honour it. Foreign founders appointing a professional nominee director should ensure the nominee has visibility of the company's financial position throughout the year, not just at year end.
How are directors’ fees taxed in Australia?
PAYG withholding
Directors’ fees are a withholding payment under the PAYG withholding system.
- The company must withhold tax from the gross fee at the director’s applicable withholding rate and remit it to the ATO.
- This applies regardless of whether the director holds an employment contract or is a non-executive director receiving fees only.
The withholding rate is determined by the director’s Tax File Number declaration and their expected annual income. If no TFN is provided, the top withholding rate of 47% applies.
Super guarantee at 12%
The super guarantee applies to directors’ fees under section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA), which extends the definition of employee to include company directors who are remunerated for performing duties for the company.
- Super must be paid to the director’s nominated complying super fund by the quarterly due date to avoid the super guarantee charge (SGC).
- The SGC is not tax deductible and includes interest and an administration component on top of the unpaid super amount.
One exception to note: if fees are paid to a company, trust, or partnership rather than to the director personally, the SGC obligation under section 12 of the SGAA may not apply, as it requires the worker to be a natural person contracting in their individual capacity. This is a structuring point that requires professional advice to confirm in your specific circumstances.
STP reporting
Directors’ fees must be reported through Single Touch Payroll (STP) in the same way as salary and wages.
- However, where a director is treated as a closely held payee and the employer has 19 or fewer payees, the employer may be eligible to use concessional quarterly reporting methods permitted by the ATO.
- This means the ATO has visibility of directors’ fee payments in real time.
If your payroll software is not configured to include director payments in STP reporting, this is a compliance gap that needs to be addressed. See our guide to payroll services for Australian businesses for more on STP obligations.
Payday Super from 1 July 2026
From 1 July 2026, the Payday Super rules come into effect, requiring super contributions to be paid on the same day as the salary or wages payment rather than quarterly.
This affects how directors’ fees and associated super are processed through payroll. If your current payroll setup relies on quarterly super payments, it will need to be updated before 1 July 2026.
Director ID compliance checkpoint
Before paying any directors’ fees, confirm that every director receiving fees has a valid director ID issued by ABRS.
- This is not directly related to the payment itself but is a compliance obligation that applies to all directors of Australian companies.
- For more on the application process, see our guide to director ID in Australia.
How much does a nominee director cost in Australia?
A nominee director, also called a resident director, is a person appointed to satisfy the requirement under section 201A of the Corporations Act 2001 that every proprietary limited company must have at least one director who ordinarily resides in Australia.
For foreign-owned Pty Ltd where all beneficial owners are based overseas, appointing a professional nominee director is the standard solution. The nominee director holds the role in a statutory capacity, ensuring the company meets ASIC’s residency requirement, but does not participate in the day-to-day management or strategic decisions of the business.
What does a nominee director do?
A nominee director fulfils the legal residency requirement and accepts the legal obligations that come with directorship under the Corporations Act:
- duty of care,
- duty to prevent insolvent trading, and
- personal liability exposure.
This is not a passive role. A nominee director who signs off on company matters without adequate oversight of the company’s financial position takes on real personal risk.
For this reason, professional nominee director services are structured around:
- A deed of indemnity from the beneficial owner to the nominee director, limiting the nominee’s personal liability exposure
- Directors’ and officers’ (D&O) liability insurance
- A clear written agreement specifying the scope of the nominee’s role and obligations
- Regular reporting from the company to the nominee on financial position and compliance status
Read more: Resident Director Services in Australia (2026 Guide for Foreign Founders)
Typical nominee director fee ranges in Australia
|
Level of involvement |
Typical annual fee range |
|
Statutory nominee only (attends no meetings, signs no operational documents) |
$3,000 to $6,000 |
|
Standard nominee (ASIC compliance, annual review sign-off, basic monitoring) |
$6,000 to $12,000 |
|
Active nominee (board meetings, operational oversight, compliance monitoring) |
$12,000 to $40,000 |
These fees are paid to the nominee director as directors’ fees and are generally deductible for the company as a business expense, subject to the commercial reasonableness requirements described above. Super at 12% applies to the nominee’s fees in the same way as any other director.
What are the risks of using a nominee director?
Appointing a nominee director is legal and common. However, the risk to the nominee director is real and should not be understated.
- If the company trades while insolvent, the nominee director faces the same personal liability as any other director under the Corporations Act, regardless of any indemnity.
- Nominee directors who accept roles without adequate financial oversight or indemnity protection have faced significant personal consequences in Australian insolvency proceedings.
How to document and pay directors’ fees correctly
Getting the documentation right is not optional. The board resolution is the legal and tax foundation of every directors’ fee payment. Without it, the payment has no proper authority, may not be deductible, and can create Division 7A loan or deemed dividend risk.
What should a directors’ fee board resolution include?
Before making any directors’ fee payment, the company must have a board resolution that includes:
- The date the resolution is passed
- The names of the directors to whom fees will be paid
- The specific amount payable to each director
- The period the fees relate to (e.g. the financial year ending 30 June 2026)
- Confirmation that the total fees fall within any remuneration cap in the company constitution
- The intended payment date or timeframe
- Signatures of the directors present and confirmation of quorum
The resolution should be recorded in the company’s minute book and retained as part of the company’s records. Section 251A of the Corporations Act 2001 requires companies to keep minutes of meetings for at least 7 years.
When should directors’ fees be paid?
As noted in IT 2534, a directors’ fee can be deducted in the year the company becomes definitively committed to paying it, provided the resolution creating that commitment is passed before year end. The payment itself can occur after 30 June, but the commitment must be unconditional and the amount must be quantified in the resolution.
- If the resolution is not passed until after year end, the deduction cannot be claimed for the prior year.
- This is a common timing error that costs companies a deduction. A pre-30 June resolution review is a standard year-end tax planning step for companies paying directors’ fees.
What happens if you pay directors’ fees without a board resolution?
Paying a director without a board resolution creates one of two problems, both costly:
- Deemed dividend risk. If a payment to a director who is also a shareholder is made without proper authorisation as a fee, the ATO may treat it as an unfranked dividend. This removes the company’s deduction entitlement and may result in the dividend being taxable in the director’s hands without the benefit of franking credits.
- Division 7A loan risk. If the unauthorised payment is characterised as a loan from the company to the director/shareholder, Division 7A of the Income Tax Assessment Act 1936 applies. The loan must either be repaid or put on a complying loan agreement with a minimum interest rate, or it is treated as an unfranked dividend in the year it was made. Division 7A problems compound over time and can result in significant back-tax liabilities.
The resolution takes approximately 10 minutes to prepare and sign. The cost of not having one can be significant.
Directors' fees and salary are not mutually exclusive. An executive director who performs both governance duties and operational work in the business can receive fees for their board role and a salary for their employment role simultaneously. Both attract PAYG withholding and 12% super, but they require separate documentation: a board resolution for the fees and an employment contract for the salary.
How Sleek helps businesses manage directors’ fees?
Sleek helps Australian companies and foreign-owned Pty Ltd manage director remuneration correctly, from the initial setup through to ongoing payroll and compliance.
- Tax and accounting: Sleek handles your company’s tax, payroll, super, and bookkeeping obligations end to end, so your remuneration arrangements stay ATO-compliant without the admin burden.
- ASIC compliance and resident director service: Sleek manages your ongoing ASIC obligations and provides professionally managed nominee director arrangements for foreign-owned Pty Ltd that need an Australian resident director.
- Transparent pricing: Every service comes with clear, upfront pricing. No hidden fees, no surprises.
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Frequently Asked Questions
Is a board resolution required to pay directors’ fees?
Yes. A board resolution is the legal authority for paying directors’ fees in Australia. Without one, the payment has no proper authorisation under the Corporations Act and may be treated as an unfranked dividend or a Division 7A loan, both of which have adverse tax consequences. The resolution must specify the amount, the period, and confirm the fees fall within any constitutional remuneration cap.
How much are directors’ fees in Australia?
There is no statutory minimum or maximum. For private companies, fees for a non-executive director typically range from $20,000 to $60,000 per year for a small to medium business. Nominee or resident directors providing a statutory compliance role typically charge $6,000 to $20,000 per year. The appropriate amount depends on the specific duties performed and should be commercially reasonable relative to the company’s size and the director’s actual contribution.
Are directors’ fees tax deductible?
Yes, directors’ fees are generally deductible for the company in the year they are paid or the year the company becomes definitively committed to paying them, provided a board resolution is passed before year end specifying the amount and the fees are commercially reasonable.
