Super For Self Employeed

Super for the Self-employed

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If you’re self-employed as a sole trader, in a partnership, or through a have a discretionary family trust, you don’t have to pay super guarantee for yourself. This can put is you a bit of predicament where the self-employed are often prioritising running their business, and managing their cashflow for today’s expenses and living in the moment rather than planning for the future.

If you were employed the employer has to pay the mandatory 11% superannuation guarantee levy of your applicable wages towards your superannuation fund. It makes perfect sense to you, as a employed person to make some contributions towards your retirement.

You can choose to make personal super contributions to save for your retirement.

Advantages to contributing to super

You don’t have to pay yourself super, but when you retire, you might be glad you did. Some advantages of contributing to your super include:

  • 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.

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.

Make sure your super fund has your tax file number (TFN). If not:

  • contributions are taxed an additional 34%
  • your fund can’t accept personal contributions
  • you may miss out on a super co-contribution, if eligible
  • it will be harder to keep track of your super.

How much to contribute to super

As a guide, if you were employed by someone else, your employers would contribute at least 11% 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) – this includes: employer contributions, salary sacrificing contributions, additional concessional contributions your employer makes as part of an agreement with you, other amounts paid by your employer from your before-tax income to your super fund, such as administration fees and insurance premiums.
  • 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.

If you have any questions or queries about Super don’t hesitate to get in contact with us at STS Accounting.