Super for the self-employed

Make sure you pay yourself super

Super for the self-employed

Superannuation is a way of putting aside savings to provide an income in retirement. For the majority of Australians, employers will make a compulsory payment into their super fund, called the Superannuation Guarantee (SG). The rate of SG payment increased to 11 per cent from 1 July 2023 and will increase gradually to 12 per cent.

Self-employed people are generally not covered by the SG and aren’t bound by law to make super payments for themselves. However, super can make a big difference to your lifestyle in retirement and managing it well might mean the difference between having the retirement of your dreams and just scraping by.

Super is a tax-effective way to save enough money for the retirement you want. There may also be a number of benefits you can claim offered by the Government.

Do I have to pay super if I am self-employed?

When you’re busy managing your own business, taking the time to think about super can seem like a problem for another day. But did you know almost 20 per cent of self-employed people have no super at all, and around 10 per cent of the workforce is self-employed*? For more information on this research, see the ASFA website here.

“It will take too long”, “It’s too hard” and “I don’t have to” are common reasons for putting off organising your super. However, with no employer to make SG payments your behalf, who will provide for your retirement if you don’t?

Do I have to pay super if I’m a contractor?

If you’re paid for the hours you work (for example someone conducting research for a market research company), rather than to achieve a result (for example, a freelance journalist writing a magazine article), then you’re an ‘employee’ for SG purposes and your employer has to make super contributions for you. For more information on contracting and super, see the ATO website here.

Claim a full tax deduction

As an incentive for paying yourself super, you may be entitled to a full tax deduction for your contributions.

Contributions up to an annual cap - $27,500 per year for the 2023-24 financial year - are generally taxed concessionally at 15 per cent, rather than marginal tax rates. Contributions may be taxed more if they exceed the contribution caps. Contributions may also be taxed more if your ‘income’ plus super contributions for the year exceeds $250,000. The ATO website has more information on contribution caps, and when the higher tax rate may apply.

If you’d like to claim a tax deduction it’s important to be aware that:

  • your contributions have to be made before 30 June to claim them as a tax deduction for that financial year
  • you need to notify your fund before claiming a tax deduction, using a specific form. Strict time limits and some additional criteria apply.

The ATO website has more information about claiming a tax deduction for your contributions here.

Receive a helping hand from the government

Some self-employed people may also be entitled to bonus co-contributions from the Government. This means that for every eligible contribution you make, the Government will make a contribution into your account, up to a certain point. The amount will depend on your assessable income and how much you contribute yourself. The maximum you can receive is $500. For more information on Government co-contributions, see the ATO website here.

How do I pay myself super?

Before you start making contributions, you need to choose a fund. This is an important decision and shouldn’t be taken lightly. Each fund offers different investment options and benefits and charges different fees, so the one you choose can have a significant impact on the size of your nest egg.

To help you decide, visit Super Guru’s Choosing a fund page, which has useful tips on choosing, comparing and switching funds.

Once you’ve decided on a fund, it’s time to start putting money into your account. Funds offer a variety of methods such as BPAY, electronic funds transfer and direct deposits. Visit your chosen fund’s website or contact them directly to choose the easiest option for you.

* Source: Super and the self-employed, ASFA Research and Resource Centre – May 2016