As the end of the financial year is looming it may be timely to look at your super contributions.
Build your own super
For many workers across Australia, having a superannuation fund provides them with financial security and peace of mind for the future, as this enables them to save safely and cost effectively for their retirement years.
There are many self-employed people who do not have an employer as such but are still keen to try and secure their financial futures and be able to enjoy a comfortable and relaxing retirement without the worry of finances hanging over their heads.
For self-employed people it is just as important to think about retirement funding, as even though you might work for yourself it is unlikely that you are going to want to – or be able to – continue working for the rest of your life in order to ensure you have money coming in. This is why it is just as important for self-employed people to think carefully about their superannuation as it is for those who are employed.
If you are self-employed or work as a contractor, you need to think about super. If you don’t act now, you might not have enough money to live on when you retire.
Why contribute to super when you are self-employed?
ASIC’s MONEYSMART website provides the following information.
“When you work for yourself it’s up to you to provide for your retirement income. Many self-employed people receive income primarily for their labour, which means when you stop working you stop getting paid. You can plan for that day by putting part of your income away in a super fund. You can make regular contributions or make lump sums less frequently, to suit your cash flow.
Super is an environment that gets preferential tax treatment, meaning you generally pay less tax on earnings within super, and you can usually get better investment returns than a bank savings account. Your money will be locked away until you retire, but that can be a good thing if you’re not so good at saving.
Claiming a tax deduction for super contributions
If you are self-employed you can claim a tax deduction for your super contributions.
If you’re self-employed, always confirm the details of any super contributions with your accountant or tax agent.
You can contribute up to $25,000 per year in concessional super contributions (those you claim a tax deduction for) and an additional $100,000 a year in non-concessional super contributions (those you don’t claim a tax deduction for).
These rules have recently changed. See the Australian Taxation Office for information on claiming deductions for personal super contributions.
How to be eligible for government super contributions
If you earn less than $36,813 per year you could be eligible for a government super contribution of up to $500. Even those earning up to $51,813 may still be eligible for some government contributions. Consider making after-tax contributions to super to qualify for the co-contribution from the government.
If you earn $37,000 or less per year, the government may make a further contribution of up to $500 to your super to compensate you for contributions tax paid as your money goes into super. See low income super tax offset for more details.
Super may not be at the top of your priority list if you’re self-employed. But don’t leave it too late – putting super money away now will make sure you have enough to live on later.”
Marilyn Rulyancich, Business Development Advisor, Business South West