Super for the self-employed
There’s no denying that becoming your own boss has its challenges, and not everyone has what it takes to run a business, but it can be a liberating and exciting experience. With the increase in Australians becoming self-employed, it’s important to have a good grip of your financial future for when work eventually winds down.
Here we outline how super works for you if you’re self-employed and provide some helpful tips so you can be confidence in your future life.
Key learnings covered in this topic
- Understanding if you need to pay your own super
- How much super you should pay
- Additional helpful tips for the self-employed
- How to pay your own super
If you're self-employed as a sole trader, contractor, freelancer or in a partnership, in most cases it’s not compulsory to pay yourself super. However, choosing to pay your own super can be a smart approach to set yourself up for the lifestyle you wish to live in retirement.
Join as a Personal Plan member >
If you’re self-employed but operate your business under a company or incorporated structure, each quarter you are required to pay the super guarantee (SG) for all your eligible employees – including yourself. This means if you are employed by your business and draw a regular wage using a traditional PAYG structure, you must make quarterly SG contributions on your own behalf into your super account.
Failing to make super contributions could mean you have to pay the super guarantee charge (a tax penalty) if you don’t pay enough or miss a payment date.
As someone who is self-employed, paying your own super gives you the freedom to make regular or lump sum payments into a super fund. This can be very helpful depending on how much cash is flowing into and out of your business each month or quarter.
With the help of our Retirement Income Calculator, you can work out what your future income will look like, with and without super. As a guide, employers are required to contribute quarterly at least 11% of an employee's earnings to super.
There are limits to how much you can contribute each financial year and it’s important to stay under your contribution caps to avoid paying extra tax.
You might be able to claim a tax deduction
Personal super contributions are also tax deductible, as long as you meet the eligibility criteria (listed on the ATO website) and are under the super contribution limits. If you claim a tax deduction on a personal contribution, then the contribution is counted as a concessional (before-tax) contribution. It goes towards your concessional contribution cap and 15% contributions tax is deducted. However, there may be additional tax if you exceed your concessional contribution cap.
Make sure your super contributions are allocated by your super fund before the end of the financial year. Super contributions are counted from when the payment is allocated by your super fund, not when the payment is sent. You also need to submit a Notice of intent to claim a tax deduction form to us. We’ve explained how.
Remember that insurance cover is available through your super
You’ll need to check each fund as insurance cover doesn’t always come automatically when you join as a self-employed member.
At CareSuper, when you join as a Personal Plan member, it’s easy to apply for insurance cover. You will receive cover if your application is approved by our insurer MetLife.
You could be eligible for a Government superannuation co-contribution
You may be eligible to get a super boost of up to $500 from the government as part
of its co-contribution scheme. Your eligibility depends on how much you contribute
and your total annual income. You can only receive a super co-contribution on personal super contributions you have not claimed a tax deduction for. Learn more.
Can I sell my business to fund my retirement?
Many business owners think the eventual sale of their business will fund their retirement. But relying on the sale of your business could be dangerous and risky retirement strategy. It can also be difficult to sell a small business and you may not sell it for what you think it’s worth.
Find and combine all of your super
It could also be a great time to see if you have any other super accounts and combine them into the one fund. By combining them into your CareSuper account, it will be easier to manage and you’ll pay less in fees which will help you have more to enjoy when work winds down.*
Manage your super through MemberOnline
Keeping track of you super doesn’t have to complicated. With MemberOnline, it gives you quick, secure access to your CareSuper account whenever you need it!
It’s easy with CareSuper to pay your own super if you are self-employed.
Step 1: Open up a Personal Plan member account.
(If you already have a Personal Plan account set-up, then you can go straight to Step 2).
Step 2: You can then make a one-off payment or set up a regular payments
(You’re spoilt for choices here on how to do this, click here to find out how).
Tip: You'll need to give your fund your tax file number (TFN) so they can accept contributions.
Information correct as at 28 November 2023.
*Before combining your super into CareSuper you should consider whether this is right for you and check if you will be charged any fees. You should also check the impact on any insurance arrangements (such as loss of insurance) or other benefits.