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Attending to super when you're self-employed will pay off

Employers  |  15/03/2016  |   2 min read

Being your own boss is a dream scenario for many people. But we all know that it’s not all tax deductions and long lunch breaks. Being self-employed means having to sort through all sorts of competing priorities and financial responsibilities.

For a variety of reasons, self-employed people can find themselves seriously disadvantaged in retirement. This is especially true if they forfeit super contributions for themselves in order to pump more money into their business, invest in new equipment, or simply to pay the bills.

While it’s compulsory for Australian companies to pay super on behalf of their employees, many self-employed people aren’t required to make contributions to their own super funds. In fact, research shows that over 25% of self-employed people have no super savings!

The expectation in these circumstances is that the sale of the business will fund retirement. But this doesn’t account for market downturns, or the long term viability of a business. In a worst case scenario it means a significantly underfunded retirement.

That might not seem like a big deal in the short term, but failing to build your super balance when you’re younger means you’re missing out on years of compound interest and growth. Assuming you earn $60,000 per annum and contribute the standard 9.5% to super, you would have almost $30,000 saved within five years, and $70,000 over the course of a decade.*

Those numbers can quickly grow and multiply, and the above example would put you on track to over $700,000 in super by the time you’re ready to retire.*

As you know, being self-employed has many rewards, including more flexibility to set your own priorities. What you might not realise is that there are a number of special concessions for self-employed people when it comes to super. These include^:

  • A tax deduction on super contributions up to $30,000-$35,000 you make for yourself
  • If you earn less than $50,454, you could qualify for a government co-contribution, which means your contributions could be topped up by the government after your lodge your annual tax return.

Call 1800 065 753 to organise an appointment with a financial planner.


*Assumptions – 7% earnings net fees and taxes, commencing at age 30 and retiring at age 65, assumes 15% contributions tax.

^ If you employ yourself through a limited company or trust and make super contributions to your super account, you are not considered self-employed for these purposes, as you are an employee of that entity.

^^This is subject to your earning less than 10% of your total assessable income and reportable fringe benefits as an employee 

This document and any information provided with it is for general information only. It does not take into account your personal objectives, financial situation or needs and should therefore not be taken as personal advice. You should consider whether it is appropriate for you before acting on it and, if necessary, you should seek professional financial advice.

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