Do you have to pay super for yourself as a sole trader?
Super for sole-traders...
If you’re a sole trader, you can choose whether you pay super to yourself. While you still need to pay super for your employees, when it comes to your own super, it’s up to you.
Benefits of paying yourself super
Paying super for yourself as a sole trader is a good way to save for your retirement. Many self-employed people find they have very little money to live on in retirement because they haven't paid super for themselves throughout the life of their business.
If you’re planning on selling your business to fund your retirement, remember that many types of businesses can be hard to sell. Without you running it, your business may not be worth quite as much.
The MoneySmart website has information about how much is enough money to live on in retirement.
Your super can also be a good safety net if you get permanently injured and can no longer work. In those circumstances, you might able to get:
- early access to your super
- a payment from your super fund
- tax concessions for certain invalidity payments.
How much and where to pay
You can make payments to your super fund through ‘personal super contributions’. The Australian Taxation Office (ATO) has a short video called Super for the self employed that outlines:
- the steps to take if you decide to make personal super contribution.
- how you can claim a tax deduction.
Claim a deduction in your tax return
In most cases, you can claim a tax deduction for your personal super contributions. However, you won’t be able to if more than 10% of your total income comes from salary or wages because you’ve worked for another business.
To claim a tax deduction, you’ll need to fill out a notice of intent form, which you can get from your super fund or from the Australian Taxation Office.
Government super contributions for businesses
Government super contributions are contributions towards your super from the government.
You don't need to apply for government super contributions. As long as you’ve lodged your tax return and given your tax file number to your super fund, the ATO will work out if you’re eligible and pay your super fund automatically.
Other things to keep in mind
When thinking about paying super for yourself, keep in mind that you might have to pay extra tax if you go over certain limits. It also might affect whether you’re eligible for other benefits or concessions. The ATO has more information about the effects of claiming a deduction for personal super contributions.
- Visit the Australian Taxation Office website for more information on claiming a deduction for personal super contributions.
- Check out the MoneySmart website for more information on how much is enough money to live on in retirement.