Super for self-employed people – Why and how to pay yourself super

MoneySmart
(www.moneysmart.gov.au)

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.

Use our super calculator

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.

Check if moving from employee to self-employed affects the insurance cover through your super. Insurance terms and conditions vary from fund to fund.

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 after-tax income (known as personal super contributions).

To claim a tax deduction, you need to send a ‘Notice of intent to claim’ form to your super fund and receive an acknowledgement from your fund.

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 10.5% of an employee’s earnings to super.

There are limits to how much you can contribute each financial year:

• up to $27,500 in concessional contributions (from your pre-tax income, for which you can claim a deduction), and
• up to $110,000 in non-concessional contributions (from your after-tax income)

The ATO has more information about super contribution caps.

If you’re on a low income, you may be eligible for government super contributions, see super contributions.