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Superannuation and the self-employed

Superannuation and the self-employed

When we think of Australian superannuation, we tend to imagine a typical worker receiving contributions from their employer, slowly building up her or his retirement funds. But this is not the reality for many Australians. After all, 2 million Australians are self-employed, according to 2013 figures from Independent Contractors. What do these individuals do, when they have no employer to pay into their fund? They still have to retire like anyone else. 

For this very reason, self-employed individuals have to take particular care with their superannuation funds. Unlike other kinds of workers, the responsibility for making sure their super coffers are filled lies with them. Thankfully, they would have gotten a lot of practice taking care of themselves independently already. 

Making super contributions

Normally, an employer is compelled by law to pay 9.5 percent of a worker’s pay cheque into a regulated superannuation fund. But if you’re self-employed — whether you run your own business or are a contractor freelancing for different companies — there’s no such compulsory contribution. Therefore, it’s up to you and you alone to make sure your super is topped up. 

Contributing when there’s no legal requirement to do so can feel like you’re wasting your hard-earned money. But you have to think about the long term – the money you’re putting in will be used to finance all your post-retirement adventures, decades down the line. The Australian government also sets up specific incentives that could help make putting this money in super — instead of say, a seemingly equally good option like a high interest savings account – worthwhile.

Claiming tax deductions

You can generally get a tax deduction for any of your super contributions, as long as you’re self-employed or ‘substantially’ self-employed. The latter means you receive less than 10 percent of your assessable income, reportable fringe benefits and superannuation contributions from an employer — the rest might come from your business, investments, government pension or even your super fund itself. Just be aware that, whilst there is no limit on the amount you can claim as a deduction, there are caps on the amount of super contributions you can make before you pay extra tax, you can contribute up to the age of 75 and if you choose to claim the contributions as a tax deduction you should notify your super fund of this within the required timeframe. Once in your fund, any contributions for which you claim a tax deduction will be taxed at the special, lower rate of 15 percent. 

As a self-employed individual, if you do not claim the contribution as a tax deduction, the money you pay into super will be considered to be an after-tax (non-concessional) contribution. You’ll also have to abide by limits (contribution caps) in place for self-employed superannuation contributions after which your contributions will be added to your assessable income and taxed at your marginal tax rate: 

  • If you were under 50 in 2015-16, you can pay up to $30,000
  • If you were turning 50 or older in 2015-16, you can pay up to $35,000

In order to claim a tax deduction, you’ve first got to inform your fund or retirement savings account that this is your plan. You can do this a number of ways:

  • Fill out a form provided by the fund for that very purpose
  • Fill out an Australian Taxation Office form 
  • Write to your fund declaring that you’re going to lodge a notice by the due date 

Bonus government co-contributions

You might also be able to get a boost from the government if you’re self-employed. As part of this, the government will match contributions you make up to a certain point. There are a number of conditions, the three main ones being:

  • At least 10 percent of your income has to be from employment or business income, or a combination of both
  • You must make personal after-tax super contributions
  • You must earn less than $50,454 a year, before tax

The government will give you 50 cents in the dollar for every contribution you make, but there are minimum and maximum values: $20 at the least, and $500 at most. You’ll receive it once you’ve lodged your tax return for the year, provided that you are less than 71 years old at the end of the financial year. If you make less than $35,454, you’re eligible for the maximum, but this value declines as you get closer to the income cap. 

Taking these strategies on board means you won’t just be acting responsibly in regards to your future retirement — you’ll also be getting more of your money’s worth. 


Advice contained in this article is general in nature and not specific to your particular circumstances.  Before making an investment decision you should consider your own financial situation and the relevant Product Disclosure Statement/s.  We also recommend you seek advice about your own particular circumstances from a licensed financial adviser.

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