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What you need to know about making self-employed super contributions

There’s always plenty on the to-do list if you’re a business owner – marketing, cash flow, customers, to name a few. Paying your own super contributions can easily drop to the bottom of the list, or be forgotten completely. However, making self-employed super contributions can be a tax-effective way to save for future you.

Do I have to make my own super contributions?

In short: no. If you’re self-employed, it’s up to you to decide if, how much, and how often you want to make contributions to your superannuation. But it isn’t just future-retired-you who can benefit from any contributions you make to your super today.

It can be tax-effective if you’re able to claim your super contribution as a tax deduction. Typically, if you make a contribution to your super and claim it as a deduction on your tax return, it will be taxed at 15%. In most cases, this is a lower rate than the rest of your income will be taxed at. Note – your income tax rate depends on which tax bracket you’re in. Keep reading to find out how to claim your super contributions as a tax deduction.

How much can I contribute?

Generally, if you are employed by someone else, your employer is required to pay 10% of your ordinary time earnings to your super account. Though this isn’t necessarily how much is right for you to contribute as a self-employed person. A good way to set yourself realistic contribution goals is to test various scenarios about how much money you aspire to have in retirement with this superannuation calculator.

Remember, there are also annual caps that apply to super contributions. Personal contributions are non-concessional (after-tax) contributions and will count towards your non-concessional contributions cap unless you have claimed a tax deduction for them.

As a self-employed person, how you choose to make super contributions is up to you. Some people prefer to pay in regular amounts (weekly/fortnightly/monthly/quarterly). Others prefer to pay in a lump sum at a time that suits them, such as just before the end of the financial year. Finding a way that works for you and your business is the ultimate goal.

If you do opt to pay in one lump sum, you’ll need to allow 3-5 business days for the money to transfer – saving yourself any undue end of the financial year, ‘did I miss the deadline’, stress.

How do I actually make self-employed super contributions?

If you already use accounting software, you may be able to make super contributions within that system. Otherwise, you can make self-employed contributions in a few simple steps:

  1. Make a personal contribution to your super fund account. Check with your super fund what the best process is for making personal contributions. 
  2. Complete a Notice of Intent to Claim form and return it to your super fund.

If you’re a Verve member, you can set up personal contributions like so:

  1. Log in to your online portal.
  2. Select the menu item in the top right and choose ‘Make a personal contribution’. 
  3. Complete the online form and then follow the payment instructions to complete the bank transfer.

From there, you can make a one-off lump-sum payment or set up a recurring transfer. Easy!

How do I claim a deduction on these contributions?

If you’d like to claim your personal contributions as a tax deduction, you will need to complete a Notice of Intent to Claim form and return it to your super fund. 

From the time you make the super contribution, you will have the rest of that financial year, and the following one, to return your form. However, you’ll still need to send the form to your fund before you lodge your tax return. So, if you make a super contribution in July 2021, you’ll have until 30 June 2023, or until you lodge your FY22 tax return, whichever date comes first. Don’t forget to allow plenty of time for the form to be processed by your fund. 

How much can I contribute?

There are caps on the amount you can contribute for both concessional (e.g. employer, salary sacrifice, self-employed) and non-concessional (e.g. personal, spouse) contributions. 

Personal contributions are non-concessional (after-tax) contributions and will count towards your non-concessional contributions cap unless you have claimed a tax deduction for them.

If you exceed the caps there could be other tax implications. The concessional contribution cap is $27,500 for 2021-22. The non-concessional contribution cap is $110,000 for 2021-22. These caps do change, so check the ATO website for the current contribution cap limits. In some cases, your concessional cap may be higher if you didn’t use the full amount in previous years. This is when unused concessional contributions “carry-forward” to the next financial year. You’ll be able to check your available concessional contributions cap through your myGov account. If you are a Verve member you can also check how you’re tracking against the contribution caps via your online account.

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There’s a fair bit to consider when it comes to self-employed super contributions. It can be worthwhile speaking to your accountant or a financial adviser if you’re not sure how self-employed contributions apply to your personal situation or business.

If you’re a Verve member wanting to set up self-employed super contributions, contact us with any questions.

Get more tips for self-employed women to get their super sorted here.

Find more information about topping up your super here.

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