Super for self-employed people
You don’t have to pay yourself super, but when you retire, you might be glad you did.
You can make regular or lump sum payments, can usually claim a tax deduction on contributions, and may be able to save tax.
Why pay yourself super
There are advantages to contributing to super:
You save for your retirement.
You can claim a tax deduction for super contributions.
Super contributions are taxed at 15%, so you may save tax depending on your situation.
Super investments usually get better returns than bank savings accounts, so your savings will grow faster.
Work out how much you can save for your retirement.
How to pay yourself super
If you already have a super fund, check that you can make contributions when you’re self employed. You’ll need to give your fund your tax file number (TFN) so they can accept contributions.
If you don’t have a fund, see choosing a super fund.
Transfer a regular amount or a lump sum
There are two ways to contribute, depending on how you pay yourself. If you receive:
A wage — set up a regular transfer into super from your before-tax income.
Income from business revenue — transfer a lump sum when you have enough cash flow.
Tax deductions for super contributions
You can claim a tax deduction for contributions you make from your pre-tax income (known as concessional contributions). You benefit because you reduce your taxable income.
To claim a tax deduction, you need to send a ‘Notice of intent to claim’ form to your super fund before the end of the financial year. Contact your fund to find out how much time you need to allow for processing.
See claiming deductions for personal super contributions on the Australian Taxation Office (ATO) website for detailed information.
Always confirm the details of any super contributions with your accountant or tax agent.
How much to contribute to super
As a guide, employers contribute at least 9.5% of an employee’s earnings to super.
There are limits to how much you can contribute each financial year:
up to $25,000 in concessional contributions (from your pre-tax income, for which you can claim a deduction), and
up to $100,000 in non-concessional contributions (from your after-tax income)
If you’re on a low income, you may be eligible for government super contributions, see super contributions.
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/grow-your-super/super-for-self-employed-people
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