For self-employed individuals, superannuation may become a neglected aspect of your payroll to yourself. It is not a requirement for self-employed individuals to pay themselves it (though it is strongly recommended).
To prevent losing out on the compounding interest of superannuation (and a potentially boosted financial situation in your retirement), paying superannuation contributions now can help to feel more secure in the long run.
Contributions you make to your super will only be taxed at 15%. Depending on which tax bracket you fit into, this might be a concession compared to your usual tax rates.
Additionally, investing your super will most likely yield a higher return than putting your money into a bank savings account.
You should be able to contribute to your pre-existing super fund after becoming self-employed. All you need to do is provide the fund with your tax file number (TFN) so that your contributions can be added to the fund.
There are two ways you can contribute to the fund, which are dependent on how you receive income:
If you make contributions to the super fund from your pre-tax income, then you can claim tax deductions for them. Your overall taxable income is reduced as well. Make sure you complete a ‘Notice of Intent to Claim’ so that you receive this deduction.
There are limits to the amount of money you can contribute to your super every financial year:
For example, employers contribute at least 10.5% of an employee’s earnings to their super – if you are not sure how much to contribute yourself, this could be a starting point.
If you are a low-income earner, you may meet the eligibility criteria for government super co-contributions.
Although it may be difficult to make super contributions when self-employed, consider starting the process so that you have some financial security when you are in your retirement period.