Why and how to pay yourself super if you are self employed

MoneySmart
www.moneysmart.gov.au

 

You don’t have to pay yourself super, but when you retire, you might be glad you did.

You can make regular or lump sum payments, can usually claim a tax deduction on contributions, and may be able to save tax.

Scam alert!Ā Watch out for cold-call offersĀ to help you get early access to your super

The only way to apply toĀ withdraw your superĀ if you are eligible under the COVID-19 early release scheme is free and through my.gov.au

Protect your personal information. Donā€™t share your myGov account details with anyone.

Why pay yourself super

There are advantages to contributing to super:

  • 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.

How to pay yourself super

If you already have a super fund, check that you can make contributions when you’re self employed. You’ll need to give your fund yourĀ 

 

Ā (TFN) so they can accept contributions.

If you don’t have a fund, seeĀ choosing a super fund.

Transfer a regular amount or a lump sum

There are two ways to contribute, depending on how you pay yourself. If you receive:

  • A wageĀ ā€” set up a regular transfer into super from your before-tax income.
  • Income from business revenueĀ ā€” transfer a lump sum when you have enough cash flow.

Tax deductions for super contributions

You can claim a tax deduction for contributions you make from your pre-tax income (known asĀ 

 

). You benefit because you reduce your taxable income.

To claim a tax deduction, you need to send a ‘Notice of intent to claim’ form to your super fund before the end of the financial year. Contact your fund to find out how much time you need to allow for processing.

SeeĀ claiming deductions for personal super contributionsĀ on the Australian Taxation Office (ATO) website for detailed information.

Always confirm the details of any super contributions with your accountant or tax agent.

How much to contribute to super

As a guide, employers contribute at least 9.5% of an employee’s earnings to super.

There are limits to how much you can contribute each financial year:

  • up to $25,000 inĀ  

    (from your pre-tax income, for which you can claim a deduction), and

  • up to $100,000 inĀ  

    (from your after-tax income)

If you’re on a low income, you may be eligible for government super contributions, seeĀ super contributions.

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