If you didn’t read Part 1, go back and check it out here. In this article, we dive into superannuation for the self-employed. Consider it a tax haven, consider it insurance for your future, consider it what you will. Just consider it. That’s all we ask. Your future-you will thank you.
Contractor v employee. Who even are you?
If you are paid for the hours you work (ie: a labourer working on a building site), as opposed to achieving something (ie: a journalist writing a newspaper article) then you are classified as an ‘employee’ and your employer has to pay you super contributions. For more info on employee v contractor classification, visit the ATO.
Super recently got a whole lot sexier
As of July 1 2017, regardless of whether you’re living the freelance dream, self-employed, or working for the wo/man, most Aussies can now claim a deduction for contributions made to their super. Huzzah! How does this work?
Let’s look at an example. If you’re earning $50K, then your tax rate is $34.5% (including the Medicare levy). The superannuation tax rate is only 15%. Ergo, every dollar in super was $1.18 before tax. But every dollar in your personal account (or if you choose to invest it elsewhere) was $1.53 before tax. So you’ve got two choices: give an extra 35 cents to el government or put that money into a long-term savings plan.
Why pay yourself super?
Apart from setting yourself up for your future, there are also incentives along the way. You now get the full tax deduction on super contributions, provided that they’re made before June 30 of that year and that they don’t exceed the contribution limit, which currently sits at $30,000 SuperGuru.
At tax time, we assume that all of your contributions are non-concessional. To get the ball rolling, members will need to submit a Notice of Intent To Claim A Deduction form which will need to be completed prior to the financial year ending. We’ll notify you leading into the end of the financial year.
Then, we’ll provide you information that you can take to your accountant to work their magic and make the most of the tax deduction that voluntary contributions now offer.
A little boost
If eligible, self-employed people can receive a maximum $500 co-contribution from the government, to match your own contributions. More info here.
Ok, how do I do it?
We can’t speak for other funds, but GROW has three simple ways to make contributions.
Round ups. Link your bank account in-app and opt to round up purchases to the nearest $1 or $2. Each time you make a payment with the nominated bank account, it will round up. So if you buy a 3pm profiterole from the local French bakery from $6.50 because #nocontrol, not only will you have a huge sugar high, but you’ll also get 50 cents into your super account with the transaction rounding up to $7 on $1 roundups.
Monthly contributions. If you can budget a certain amount each month, a) you’re a financial advisors dream b) you can make this work to your advantage by nominating a monthly contribution.
One-off contribution. Pull in a big pay cheque this month? Sell your grandma’s old car on Gumtree?