I'm self-employed
If you’re self-employed you generally will not be legally required to make contributions for yourself to a super fund. But with retirement lasting up to around 30 years, you shouldn’t just rely on the sale of your business to fund your post-work lifestyle. And super can be an attractive savings vehicle.
Can I join a super fund?
Yes, you can. Many people who are currently self-employed already have a super fund as a result of previous employment. Whether you do or not, you can choose to join a super fund for the benefits available including generous tax deductions.
Super and the self-employed
The majority of Australians who are self-employed do not generally fall within the coverage of the Superannuation Guarantee (SG). The reason for this is that the SG system only applies to individuals who receive more than $450 per month in wages or salary. This means the self-employed are automatically at a disadvantage to employees when it comes to compulsory savings.
ASFA research shows that just over a quarter of self-employed people have no superannuation savings at all. This is in contrast to the four per cent of wage and salary earners with no superannuation.
There are however, benefits available to contributing to super as a self-employed person, including:
- full tax deductions for super contributions;
- eligibility for the Government Co-contribution scheme on those contributions you don’t claim a tax deduction on; and
- benefits stemming from additional concessions for specific invalidity payments.
Tax deductions
The superannuation system in Australia offers a number of generous tax concessions on contributions into a super account. You can read more about how super is taxed on the ATO website.
Self-employed people, however, have the added benefit of being able to claim a tax deduction on their personal super contributions. After-tax contributions to a super fund are taxed at a rate of 15 per cent when they are received by the fund.
To claim a tax deduction you must notify your superannuation fund by the time you lodge your income tax return, or by the end of the following financial year, whichever is earlier. A tax deduction is available for contributions made until the contributor reaches age 75.
If you are also an employer, you can claim a deduction for all contributions made on behalf of employees under the age of 75, or if the employee is over 75 and the contribution is made under an industrial award.
Did you know? Voluntary superannuation contributions are subject to caps and large penalties apply for going over these. Find out more about the maximum amounts you can contribute on the ATO website.
The Government Co-contribution
Since 1 July 2007, the self-employed have been eligible to receive the Government co–contribution if they make an after-tax contribution to their super fund. To qualify, as a self-employed person, at least 10 per cent of your total income must have come from eligible employment, running a business, or combination of both, and you must be under 71 years of age at the end of the financial year.
If you are contributing to a super fund, make sure it has your tax file number. Otherwise your contributions may be taxed the full 31.5 per cent, and your fund won’t be able to accept your personal contributions; this would make you ineligible for the Government bonus.
Getting started with super
The self-employed might not fall within the coverage of compulsory super contributions, but what happens to any contributions made, remains the same regardless of your working situation. And it’s important to understand what happens to your money so you can get the most out of it. Read the What you need to know section for the low-down.
Have one or more funds from previous employment?
If you’ve already got a super fund from when you were an employee in the past, you can continue making contributions into the same account. Contact your fund to find out how they accept contributions. Most accept bank transfers, credit card payments, and cheques.
If you’re unsure whether you already have an account, check out the Lost super section for info on how to find out.
If you’ve got several accounts, it could be worth rolling all your money into just the one – that is consolidating your accounts.
Need to join a super fund?
If you’ve decided you’d like to start making super contributions, the first thing you’ll need is to choose a superannuation fund to pay your money into. Read up on the types of funds available and some tips on comparing funds to find the best one for you. Setting up a self-managed superannuation fund (SMSF) is another option. Find out more about SMSFs.
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