Super for self-employed individuals

It is not necessary for you to pay super to yourself, but it might help you feel more secure about your finances during retirement.

Contributions you make to your super will only be taxed at 15%. Depending on which tax bracket you fit into, this might be a concession compared to your usual tax rates. Additionally, investing your super will most likely yield a higher return than if you put your money into a bank savings account.

You may be able to contribute to your pre-existing super fund after becoming self-employed. All you need to do is provide the fund your tax file number (TFN) so that your contributions can be added to the fund. Alternatively, you can choose a new fund.

There are two ways you can contribute to the fund which are dependent on how you receive income:

  • Wage: Make regular transfers to the super fund from your pre-tax income
  • Income from business revenue: Transfer lump sum amounts when there is sufficient cash flow

If you make contributions to the super fund from your pre-tax income, then you can claim tax deductions for them. Your overall taxable income is reduced as well. Make sure you complete a ‘Notice of intent to claim’ so that you receive this deduction.

There are limits to the amount of money you can contribute to your super every financial year:

  • Up to $25,000 in concessional contributions (from pre-tax income, so you can claim a deduction)
  • Up to $100,000 in non-concessional contributions (from after-tax income)

As an example, employers contribute a minimum of 9.5% of an employee’s earnings to their super – if you are not sure how much to contribute, this could be a starting point.

If you are a low income earner, then you may meet the eligibility criteria to receive government super contributions.

Although it may be difficult to make super contributions when self-employed, consider starting off the process so that when you are in your retirement period, you have some financial security.

Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items.