A guide on Super for self-employed

Employees in Australia have their superannuation handled by their employers. However, things can get confusing when it comes to paying super for self employed people, such as contractors, freelancers, and sole traders. In this article, we answer some of the most common questions on superannuation.​

Superannuation (super) is money put aside for retirement, earned while you are working.​

Your employer is required to pay a minimum amount of super based on a minimum guarantee, known as a ‘super guarantee’. This guarantee is dictated by the government and is gradually set to rise over the coming years to 12% in 2025.​

Unlike regular investments, you can’t withdraw money from your super whenever you like. It can only be used or withdrawn under certain circumstances - for example, when you turn 65.​​​

Long-term investment and savings schemes are truly important. People without long-term savings will one day find themselves living on government payments or what is referred to as a pension, which are small amounts that cover a ‘no-frills’ lifestyle.​​​

If you're self employed as a sole trader or in a partnership, in most cases, you are not obligated to pay yourself the super guarantee but you have the option to make super contributions. Research shows that self employed super contributions tend to be lower than those of full-time employees.  While it may be necessary to contribute less super when your business is starting up, it’s important to consider contributing more once your business is well established.​

The benefits of super for self employed include:​

Contributions to super for self-employed workers are usually paid directly from a bank account to a super fund, via Bpay or direct debit.​

If you start contributing to your super, you could be eligible for a tax deduction for your contributions. There are two types of contributions you can make: before tax and after tax. ​

There are limits on the amount of super contributions you can make each year and it’s important to not pay more than these limits - otherwise, you’ll need to pay additional tax. It is important to note that the super cap applies to contributions for both super guarantee and salary sacrifice contributions.​

If you have a super balance of under $500,000 on 30 June, any unused portions of your concessional contribution cap from previous financial years (beginning 2018/19) are automatically carried forward for you each year, allowing you to potentially contribute more than $27,500 as a concessional contribution in any one year. ​

Whenever you employ staff, you’ll need to pay the super guarantee for your employees on top of their normal wages and salary. The ATO has provided a list of all the things you need to do.​

Your payroll software should automatically include this in the returns made to ATO.​ If your payroll software doesn’t provide this feature, we recommend finding one that does!​

If you’re working with contractors or freelancers, you’ll need to determine if they are employees for super purposes. If you’re hiring a contractor who is paid wholly for their labour, performs the work personally, and is paid for hours worked, they are entitled to employer super contributions as any other employee.​

Unsure if your staff is a contractor or an employee? The ATO has very practical and clear guidelines.​

If you’re an employee of your business receiving wages, you’re sorted. The business pays its percentage contribution and via the payroll system – the same as all other employees.​​​

On the other hand, super for self employed needs to be treated as a personal expense.​

You can access your super when you:​

Early access to your super only occurs in some very limited circumstances. Some of these may be:​

A self-managed super fund (SMSF) is a private super fund that you manage yourself. When you have a SMSF, you choose your investments and insurance.​

Your SMSF can have no more than six members. As a member, you’re a trustee of the fund - or you can get a corporate trustee. In either case, you’re responsible for the fund. Having control over your super can be appealing, but it takes a lot of work, time and an understanding of the risks.​

Your lost super may be held by your super fund, or by the Australian Taxation Office (ATO). It's easy to find your lost super online:​

This depends on the type of contributions that you’ve made. If they are non-concessional, they are usually tax-free. For more information on tax for concessional contributions, you can read more here, or speak to your accountant.​

3. How can I protect myself from super scams? Scammers can target you to steal your super via email, phone and online. Read further about how you can protect yourself from the scammers. ​

We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant would. ​​​

We have a dedicated team of certified accountants and a support team to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about.​

Super for self-employed workers can be simple - we’re here to help. Talk to one of our team members or get started for free today.​