Owner Drawings, Director Loans and Personal Spend on Card

If you run your business as a sole trader or partnership, money you take out for yourself is owner drawings: it reduces your equity and is never a business expense. If you run a company, the business is a separate legal person, so money a director takes out (or personal spending on the company card) is usually recorded in a director loan account. Either way, the bookkeeping job is the same: keep personal money out of your expenses and in an account where it's visible.

This post is about the bookkeeping. How those amounts are taxed, including Division 7A for company loans to directors, is a conversation for your accountant.

First, what structure are you?

The right account depends on your business structure, so start here.

If you're not sure which structure you are, check your ABN details or ask your accountant before you set up accounts. Getting this wrong creates a long clean-up later.

Sole traders: drawings, plain and simple

Ella is a sole-trader photographer in Wollongong. On the 1st of each month she transfers $3,500.00 from the business account to her personal account to live on. That isn't a wage. As a sole trader, she can't pay herself a wage; the business profit is her income. The $3,500.00 is drawings.

In her books:

• Bank account goes down $3,500.00
• Owner drawings goes up $3,500.00 (it sits in equity on the balance sheet)
• Her P&L doesn't change

Over FY2026-27 (1 Jul 2026 to 30 Jun 2027), twelve of those transfers add up to $42,000.00 of drawings. Her profit is whatever the business earned minus its real expenses, regardless of how much she drew. If she'd coded the transfers as "Wages", her P&L would show $42,000.00 less profit than the business actually made.

Companies: the director loan account

Sam is the sole director of a small IT support company in Darwin. The company pays him a salary through payroll, and that's a proper business expense. But in Sep 2026 he also did three things from the company account that weren't salary:

1. Transferred $2,000.00 to his personal account to cover a car repair.
2. Paid $186.40 at a supermarket on the company card for his household groceries.
3. Paid a $450.00 personal phone bill from the company account.

None of these is a company expense. In the company's books, all three go to the director loan account. In Sep 2026 Sam owes the company $2,636.40 ($2,000.00 + $186.40 + $450.00).

Now the other direction. In Oct 2026 Sam paid a $320.00 company software renewal on his personal credit card because the company card was maxed out. The company owes him that money. In the books, that's $320.00 to Software (an expense), with the other side reducing his director loan balance. After that, Sam owes the company $2,316.40 ($2,636.40 minus $320.00).

That running balance is the whole point of the account. At any moment you can see who owes whom.

Why this matters

A director loan balance where the director owes the company can have real tax consequences under Division 7A if it isn't dealt with properly by the company's tax return due date. We won't go into the rules here, because they depend on your circumstances. What we will say: your accountant can only manage it if your books show the balance clearly. Personal spending hidden in "Sundry expenses" hides the problem until it's expensive.

Personal spend on the business card: the most common case

Most mixed spending isn't a deliberate transfer. It's tapping the wrong card at the shops. A few ways to handle it in the books:

• The whole transaction is personal. Code it to drawings (sole trader or partnership) or the director loan account (company).
• Part is personal. Split the transaction. Say $142.80 at a pharmacy: $38.50 of first-aid supplies for the work van and $104.30 personal. Business part to the right expense, personal part to drawings or director loan. Check: $38.50 + $104.30 = $142.80.
• You pay the business back. Transfer the money from your personal account to the business account and code that receipt to the same drawings or director loan account. It reduces what you owe.

Don't code the personal purchase as an expense and then "fix it" by never claiming it. Your books will still show inflated expenses and the wrong profit.

Business spend on your personal card

The opposite also happens, especially when you're starting out. If you paid a business bill with personal money:

• Record the expense in the business books on the date it was paid, coded to the right expense account and GST code.
• The other side goes to owner funds introduced (sole trader) or director loan (company), because the business owes you.
• Keep the receipt with your business records. Because the business bank feed won't see the transaction, the receipt is your only evidence.

A month-end checklist for personal money

• [ ] Search every expense account for supermarkets, pharmacies, streaming services and anything else that smells personal
• [ ] Look for transfers to your own name and make sure they're drawings or director loan, not wages or expenses
• [ ] Check card purchases on weekends and public holidays
• [ ] Record any business costs you paid personally
• [ ] Look at the drawings or director loan balance. Does it look roughly right?
• [ ] For companies, note anything big for your accountant before year-end

Pay yourself predictably

The cleanest books come from boring habits. Take drawings as one regular transfer rather than lots of little ones. If you're a company director, talk to your accountant about how to pay yourself (salary, dividends, or a mix) and stick to it. And keep your personal and business cards in different spots in your wallet, so the wrong-card tap happens less often.

How HelloBooks helps

In HelloBooks, every bank-feed and CSV transaction lands in a review list where you confirm or change the category, which is the natural moment to catch a personal purchase and move it to drawings or a director loan account. Your Balance Sheet shows those balances clearly, and your P&L stays free of personal spending. You can invite your bookkeeper, BAS agent or accountant into the same books so they can see the drawings and loan balances directly instead of asking for spreadsheets. On Pro (A$30 a month) you can set up unlimited users with roles. See our bookkeeping features and plans.

FAQs

Can a sole trader pay themselves a wage?

Not in the usual sense. A sole trader's money taken out is drawings. The business profit is the owner's income for tax purposes. Your accountant can explain how that's taxed for you.

Are owner drawings tax deductible?

No. Drawings aren't a business expense. They're the owner taking out their own money.

What's the difference between a director loan and drawings?

Drawings belong to sole traders and partnerships, where the owner and business aren't legally separate. A company is a separate legal entity, so money a director takes that isn't salary or a properly declared dividend is usually recorded as a loan between the company and director.

What if I accidentally paid personal expenses from the company account all year?

Record them all in the director loan account now, total them up, and speak to your accountant before the company's tax return is prepared. The earlier they know, the more options they usually have.

Should GST be coded on personal purchases?

No GST should be claimed on the personal part. Code personal amounts so they stay out of your GST figures; your BAS agent or accountant handles lodgement.

Keep personal money visible, keep it out of expenses, and give your accountant the balance before they have to ask.

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