Working to the grave – super for the self-employed

For the majority of Australians, employers make compulsory payments into their super fund, called Superannuation Guarantee (SG). The rate of SG payments increased from 9.5 percent to 10.5 percent from 1 July 2022 and will increase gradually to 12 percent.

Generally, if you are self-employed you are not covered under Superannuation Guarantee and aren’t bound by law to make super payments for yourself. One of the most common replies I hear from business owners is that they want to “get off the tools”. However, the reality for many self-employed people is that a super hasn’t been a priority working through retirement becomes a reality.

Did you know that almost 20 percent of self-employed people have no super at all, and around 10 percent of the workforce is self-employed*?

Did you know that almost 20 percent of self-employed people have no super at all, and around 10 percent of the workforce is self-employed*?

Cash flow requirements of the business will always be the priority of the business owner, and the discipline of contributing into super is generally one of the last thoughts. Often it is a discussion at a tax planning meeting in the last 2 months of the financial year to try and reduce the tax bill. $27,500 per year from the 2021-22 financial may be claimed as a full tax deduction, however the discussion and the contribution don’t have to be a one-off (it can be paid monthly to smooth out cash flow concerns for the business owner).

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

  • your contributions have to be received by the super fund 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

How do I pay myself super?

Before you start making contributions, you may need to choose a super fund. This is an important decision and shouldn’t be taken lightly. Each fund offers different investment options and benefits, as well as charges different fees, so the one you choose can have a significant impact on the size of your retirement nest egg. Understanding which fund is the right fund for you is the easiest form of financial advice someone can seek from a financial planner.

Additionally, a number of personal insurances, such as life insurance can be paid out of your super and be tax deductible in your superannuation fund.

If this article has raised any questions for you, we encourage you to book an obligation-free chat at Salt. The team at Salt Financial Group is fully equipped to help in all areas;

Our Accountants can assist with

  • getting the full tax benefits of making personal super contributions

  • ensuring your business is generating enough cashflow to make super contributions:  and

Our Financial Planners can assist with

  • finding the right fund for you and

  • assist with mapping out your current and future personal cashflow needs.

Jenni Anderson