Superannuation tips for the self-employed

23 June 2023

If you’re self-employed, you may be focused on today’s challenges. Saving for retirement might feel like something to think about later. But superannuation is a bit like planting a tree. You need to sow the seeds now to make sure you have enough fruit to enjoy in retirement.

If you’re self-employed, it could be a good idea to consider your retirement needs and understand how paying yourself super could benefit you and your business. What you may not realise, is you could be legally required to pay yourself super based on how your business is set up. Another important thing to remember is you need to pay super to eligible employees under the super guarantee.

Understand how your business structure can impact your super requirements

If you run your business – and pay yourself – it’s not always clear if super is compulsory.

Depending on the structure of your business, you may not have to pay yourself super. For example, if you’re self-employed, a sole trader or in a partnership, it’s up to you if you make personal contributions.

However, if you’re employed by your business under a traditional PAYG setup (i.e. you draw a wage from the business) then you may be legally required to pay yourself super.

You can learn whether you have to make your own super contributions by visiting the ATO’s website.

READ MORE: DO YOU NEED TO PAY YOURSELF SUPER?

Consider paying yourself super, even if it’s not required

If super’s not a legal obligation, you might think it’s insignificant.

However, as most people will live in retirement for at least 25 years, it’s important to have enough money saved up. How much you need will depend on your retirement goals. So think ahead to the lifestyle you would like to enjoy. This will help determine how much super you should aim for and what contributions you should make over your working life.

AustralianSuper’s Super Projection Calculator can help give you an idea of what your future income will look like, with and without super. It can also show you the difference adding to your super now could make to your retirement lifestyle down the track.

4 things to know about paying yourself super

1. You might be able to claim a tax deduction

If you’re paying yourself super, you could be eligible for a tax deduction.

There are 2 main types of contributions for business owners and the self-employed: non-concessional and concessional. Different rules apply for each.

Non-concessional contributions

Non-concessional contributions are contributions you make from 'after-tax' dollars. The limit is $110,000 per year (more if using the bring-forward rule). These are contributions for which you haven’t claimed a tax-deduction.

Concessional contributions

Before tax
Before-tax contributions are also known as concessional super contributions. They're contributions you or your employer make from your before-tax income.

After tax
You can claim a personal tax deduction for any after-tax personal contributions you make to your super. Bear in mind, any after-tax contributions you claim a tax deduction for are treated like before-tax contributions and fall within your concessional contributions cap. Time limits and conditions apply.

Before adding to your super, consider your financial circumstances, contribution caps that may apply, and tax issues. We recommend you consider seeking financial advice.

READ MORE: CONCESSIONAL CONTRIBUTIONS

How to claim a tax deduction for your super contribution

Before you can claim a deduction for your personal super contributions, you must give your super fund a Notice of intent to claim and receive an acknowledgment from your fund.

Once your super fund has accepted your intention to claim a deduction for your personal contributions, your super fund is required to deduct 15% tax from those contributions.

You can then claim this deduction when you complete your tax return.

On your tax return, make sure you claim the amount of money you stated on your Notice of intent.

AustralianSuper members

DOWNLOAD AND COMPLETE A NOTICE OF INTENT TO CLAIM A TAX DEDUCTION FOR PERSONAL SUPER CONTRIBUTIONS (PDF)

OR COMPLETE AN ONLINE FORM THROUGH YOUR ACCOUNT

2. You can carry forward super contributions into the new financial year

Depending on your existing super balance, you may be able to carry forward any unused part of the concessional contributions cap from previous years for up to 5 years. As your business grows and becomes more successful, or you have a good quarter, you may be able to pay extra contributions to your super.

FIND OUT MORE: ADD TO YOUR SUPER AND RETIRE WITH MORE (PDF)

Before making extra contributions, consider your debt as well as current and future financial commitments, including any super payments you may need to make to eligible employees.

3. Insurance cover may be available through your super

Nobody likes talking about death or being unable to work due to injury or illness. But making sure your loved ones are financially supported or that you could survive without pay for a set period can bring you security and peace of mind.

The good news is you may already have Death, Total & Permanent Disablement and Income Protection cover through your super. If you’re self-employed, check with your super fund to make sure you’re insured and prepared for the worst.

You may also want to reassess your insurance annually, or when your life changes in a major way. Like if:

• You get married
• Have a child, or
• Buy a property

If you join AustralianSuper as a self-employed worker, you’ll join our Personal Plan. Cover isn’t provided automatically with this plan, but you can apply for it anytime. You need to provide detailed health information for our insurer to consider.

READ MORE: INSURANCE THROUGH AUSTRALIANSUPER

4. You could be eligible for a Government superannuation co-contribution

If you’re a low or middle-income earner, the Australian Government may be able to help boost your super with a co-contribution. Depending on how much you earn, if you make after-tax contributions to your super account, the government also makes a contribution (called a co-contribution) up to a maximum amount of $500 if you meet the eligibility criteria.

The co-contribution gets paid directly into your super account after you’ve lodged your tax return for that year, proving your income.

For more information download our factsheet: Add to your super with government co-contributions.

READ MORE: GROW YOUR SUPER

FIND OUT MORE: SUPER CO-CONTRIBUTIONS

What to know if you’re a business owner with employees

Understand your super guarantee obligations to any employees

If you employ people, you may need to make sure you’re paying them super in line with the superannuation guarantee.

The superannuation guarantee, or SG, dictates the minimum percentage of an employee’s earnings you need to pay into their super fund.

From 1 July 2023, the superannuation guarantee is 11%. Legislation states that super payments will increase incrementally each year until they reach 12% in 2025.

If your employees are aged 18 or over, they’re generally eligible to receive SG super contributions. Visit the ATO for the latest information on this rule.

If your employees are under 18, they must work more than 30 hours per week to be entitled to SG contributions. Contractors may also be eligible, depending on whether they’re considered an employee for super purposes.

As a business owner, you must pay SG into your employees’ complying super funds at least 4 times a year, by the quarterly due dates. So make sure you’re aware of your responsibilities, or speak to your accountant, or a financial adviser for guidance. AustralianSuper members can find out more on the Fund’s Super for Employer pages.

FIND OUT MORE: SUPER RULES FOR EMPLOYERS

Tip: Find and consolidate your super

If you’ve had more than one job before you started your business, you could have ‘lost’ super.

You can find any lost super you may have using the ATO online services through myGov. Alternatively, if you’re an AustralianSuper member and give the Fund consent to use your Tax File Number (TFN), we can help track down your lost super.

If you find lost super, you might want to consider consolidating it into one account. By doing so, you only pay one set of fees. You’ll also know where to go for any insurance changes and claims.

Before making a decision to consolidate your super, look out for any fees or charges that may apply before closing an account. At the same time, make sure you understand how consolidating your accounts will impact your additional benefits, such as insurance. If you wish to claim a tax deduction for personal super contributions, you must lodge a notice of intent to claim a tax deduction with your other fund before you combine your super.