As a sole trader, managing your superannuation is in your hands. While not legally required, contributing to your super offers numerous benefits. You have the freedom to choose from any open super fund.
This guide will assist you in selecting the right super fund and understanding the benefits, especially for those self-employed. Once your ready you can also compare some of the top performing super funds.
There are no specific funds that are dedicated to self-employed people. Instead, you're free to join any super fund that's open to the public. The best super fund for self-employed workers will have the the following features:
If you want a bit more help choosing a fund, you can take a look at Finder's best super fund picks to get you started.
The information in this table is based on data provided by SuperRatings Pty Limited ABN 95 100 192 283, a Corporate Authorised Representative (CAR No.1309956) of Lonsec Research Pty Ltd ABN 11 151 658 561, Australian Financial Services Licence No. 421445. In limited instances, data for a small number of products is provided directly by the individual super fund.
*Past performance data and fee data is for the period ending July 2024
If you're an employee, your employer is legally required to pay you super guarantee payments. But if you're self-employed, for example a sole trader, freelancer or contractor, you don't have an employer to pay you super. You're not legally required to pay yourself super, but it's a good idea to do so.
Employers are required to pay employees super at a rate of 11% on their annual earnings. If you're self-employed and choose to pay yourself super, you don't have to meet this same amount and can instead pay yourself less (or more) than this. However, the same contribution limits apply to self-employed workers.
| Response | Male | Female |
|---|---|---|
| Strong performance returns | 79.47% | 74.57% |
| Low fees | 76.63% | 78.39% |
| Brand reputation | 28.66% | 23.9% |
| Type of investment option | 19.11% | 12.43% |
| Customer service | 18.09% | 18.93% |
| Ethical and socially responsible investments | 10.57% | 16.06% |
| Risk exposure | 13.01% | 9.94% |
| Insurance options | 6.91% | 10.13% |
| Fund size | 7.72% | 6.69% |
| Super funds app | 4.27% | 5.74% |
| None of the above | 1.63% | 2.87% |
| Number of awards won | 0.61% | 2.49% |
| Other | 0.2% | 0.57% |
According to August 2023 statistics from the Australian Bureau of Statistics, there were approximately one million independent contractors in Australia, constituting 7.5% of the employed population. These statistics underscore the growing trend of self-employment in the country.
Now, let's delve into the advantages of advantages of paying yourself super are:
There are tax benefits with paying yourself super. Super is taxed at the lower rate of 15% which, depending on what you earn, could be a lot lower than the standard rate of tax you pay. Because of this, you can actually claim tax deductions when you contribute to your super as a self-employed worker.
Note: You also need to remember to lodge a 'notice of intent to claim a tax deduction' form with your super fund before the end of the financial year when you're doing your tax return. This is to ensure your super fund is aware that they need to tax your contributions within the fund.
The biggest benefit of paying yourself super is that you're saving for your retirement. Superannuation is designed to ensure Australians have enough money saved to fund their lifestyle when they're no longer earning a regular income. The more you have saved in super, the more comfortable your retirement will be.
Superannuation was created so Australians weren't relying on the Age Pension to fund their lifestyle after they've stopped working. The Age Pension is designed as a safety net or back up, but it shouldn't be relied on as an income source and it has strict eligibility criteria. If you pay yourself super while you're self employed, you're less likely to need to apply for the Age Pension.
The same contribution limits apply to self-employed workers that apply to all super fund members.
You can pay yourself up to $27,500 in concessional super contributions each year. Concessional contributions are the contributions you can claim as a tax deduction if you're self employed. This means the money will be taxed in the super fund at the rate of 15% instead of your income tax rate.
If you want to contribute even more to your super you're welcome to do so, however you won't be able to claim any more than the $27,500 as a tax deduction. You can contribute up to an additional $110,000 to your super each year as non-concessional contributions. This means the money will be invested with the rest of your super balance and will benefit from investment returns, but, it'll be taxed at your incomes tax rate.
Paying yourself super is similar to making a standard bank-to-bank transfer online. You'll need to log into your online portal for your super fund to access your account. From here, you can select 'make a contribution' and simply enter how much you'd like to send to your super.
It's a good idea to set regular payment dates that suits you and your business. For example, a lot of Australian businesses pay their employees superannuation once a quarter (once every three months) so this could be a good idea for you too. But depending on your cash flow, you might decide to pay yourself super once every six months or even once a year instead.
Compound growth allows your super returns to be reinvested and generate their own returns, helping your balance grow much faster over time. Here's how it works.
Here’s a current list of the worst-performing super funds in Australia and steps for how to switch to a better fund.
Here’s how to choose between the different investment options offered by your super fund, including balanced, growth and ethical options.
This guide explains how salary sacrificing into your super works, how to set it up and what to consider before going ahead.
Find out what industry super funds are and how they’re different to retail super funds, and compare funds using our comparison tool.
Read our overview of superannuation fees you may be required to pay.
If you've held a super fund for a while, you may have lost super that you don't even know about. Read on to find out how to recover your lost super.
Steps to choose a beneficiary for your superannuation fund proceeds in the event of your death.
Unsure whether to use your extra income to contribute to your super or buy shares? Here are some of the benefits of each.
Here's how retail super funds work and how they compare to industry super funds. Compare retail super funds here and find the best one for your needs.
Above you say there is no employer contribution for self-employed workers so it’s tax savings that are significant. Is this all that a self-employed worker gets?
So if the worker gets less than the tax threshold each year or thereabouts there is really no point? He is basically just paying tax. Is this it?
Hi Willem,
thanks for the question.
Unfortunately I’m not able to comment on whether or not being self-employed is effective from a tax perspective. It should be known that self-employed workers also get super-related benefits such as the ability to claim a full tax deduction for super contributions, and I’ve emailed you a page from the ATO regarding this.
I hope this helps,
Marc.
Can a self employed person join an industry super fund if so which ones
Hi John,
Thanks for your comment.
Yes, there are industry super fund options for the self-employed.
Industry Superfund is one that offers services to the self-employed. Depending on what sector you’re in, there could be Retail funds and Public sector fund.
Cheers,
Shirley