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Superannuation for self-employed workers

If you're self-employed you're not legally required to pay yourself super, but it's a good idea to do so.

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If you work for yourself, you can't rely on an employer to make payments towards your superannuation. Instead, this responsibility falls to you. It's not required by law that you pay yourself super, but it's hugely beneficial to make ongoing, regular payments towards your super in order to save for your retirement.

Let's take a look at the benefits of paying yourself super, the limits to how much you can put into your super and how to pay yourself super if you're self-employed.

AustralianSuper - Pre-mixed, Balanced Super Fund

AustralianSuper - Pre-mixed, Balanced Super Fund

Choose from an extensive range of investment options and enjoy discounted rates on select banking products when you join AustralianSuper.

  • 2019 Finder Awards Winner: Best Super Fund - Balanced
  • Join and consolidate your super with the easy-to-use mobile app
  • Australia's largest industry super fund
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Compare super funds

Name Product Past Performance - 1 Year Past Performance - 3 Years Performance - 5 Years Calculated fees p.a. on $50,000 balance
AustralianSuper - Pre-mixed, Balanced option
0.56%
6.67%
7.37%
$411.18
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.
Virgin Money Super - Lifestage Tracker
-0.86%
6.46%
$358
Virgin Money Super's Lifestage Tracker invests in a range of different assets in line with your age, reducing your risk as you get older, and has some of the lowest fees in the market.
Sunsuper Lifecycle Balanced
-1.69%
5.7%
6.45%
$453
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.
QSuper Lifetime - Aspire 1
-0.35%
5.97%
6.91%
$315
QSuper is one of the largest member-owned funds in Australia. The QSuper Lifetime fund adjusts your investments each 7-10 years as you get older, so you're not taking on too much risk.
HESTA Balanced Growth
N/A
5.84%
6.27%
$538.53
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.
Spaceship GrowthX
11.93%
14.45%
$573
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's Growth X fund invests heavily in Australian and international shares, with a focus on technology stocks. Performance figures and fees supplied by Spaceship, not Chant West.
Australian Catholic Super Lifetime - Grow
-0.39%
N/A
$588
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.
Australian Ethical Super Balanced
2.77%
6.88%
6.88%
$622
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.
Aware MySuper Life Cycle Growth
1.33%
6.34%
6.56%
$549.42
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
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The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at https://www.chantwest.com.au/financial-services-guide . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending June 2020.

Why should I pay myself super if I'm self employed?

Some of the main benefits to paying yourself super are:

  • Save for retirement. 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.
  • You'll be less reliant on the Age Pension. 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.
  • You'll develop good money habits. Paying yourself super on a consistent basis, for example each month or each quarter, will help you develop and maintain good budgeting habits.
  • There are tax benefits to paying yourself super. 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. We'll outline how this works in more details below.

Tax benefits of making super contributions as a self-employed worker

Super is taxed at the lower rate of 15%, unlike your regular income which can be taxed as much as 45% depending on how much you earn. Because you've already paid tax on your money before you add it to your super, and it will later be taxed again at 15% by your super fund, you're entitled to claim these contributions as a tax deduction. However, there are limits as to how much you can contribute to your super and claim as a tax deduction.

What are the super contribution limits if you're self employed?

The same contribution limits apply to self-employed workers that apply to all Australians. You can pay yourself up to $25,000 in concessional super contributions each year. Concessional contributions are the contributions you can claim as a tax deduction if you're self employed. 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 $25,000 as a tax deduction.

How to pay yourself super when you're self employed

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.

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4 Responses

  1. Default Gravatar
    WillemJanuary 28, 2014

    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?

    • Avatarfinder Customer Care
      MarcJanuary 28, 2014Staff

      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.

  2. Default Gravatar
    JohnAugust 7, 2013

    Can a self employed person join an industry super fund if so which ones

    • Avatarfinder Customer Care
      ShirleyAugust 8, 2013Staff

      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

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