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If you work for yourself, you're responsible for paying your own superannuation. There aren't any specific super funds for self-employed workers, instead you're free to join any open super fund that you'd like to.
*Past performance data is for the period ending December 2020.
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 10% p.a. 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.
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.
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.
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.
Some of the main benefits to paying yourself super are:
Superannuation is the main way of saving for your retirement in Australia. Your superannuation is one big investment portfolio in your name that's managed for you by your super fund.
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There are 24.4 million super accounts in Australia from a total of 84 funds, with MySuper assets equalling $812 billion. Find out more in our report.
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