When you’re an employee of a business – big or small – superannuation is easy to forget. Someone else handles the whole seemingly invisible transaction, so unless you’re intentionally keeping track of your super balance, it’s out of sight, out of mind. But what about super for self-employed folks? We enlisted Tamara-Lee Beveridge, a business activity statement (BAS) agent from BizCore 360, to explain the nitty gritty of super when you work for yourself.

DO YOU EVEN NEED TO PAY YOURSELF SUPER?
Simply put, no, because you’re not legally required to do so. “If you are self-employed as a sole trader or in a partnership, you as the individual are considered the entity and do not fall under the Employee Super Guarantee Act,” Tamara explains. “This means, you do not have to pay super for yourself.”

However, whether you want to pay yourself super is a whole different kettle of fish. As we previously heard from business-savvy folks Osha Shealey and Phoebe Powell, getting on top of your superannuation funds and making sure you have enough money for the future is always a good idea.

SO, HOW DO YOU DO IT?
It’s actually a pretty simple process. According to Tamara, if you’re a sole trader or in a partnership, and you’re under the age of 75, then you can make payments directly from your bank account into your choice of super fund. “It may be a once-a-year payment or more frequently, like weekly, fortnightly, or monthly. It is a personal choice,” she says. “You should ensure you have provided your tax file number to the super fund, otherwise your contributions will be taxed at the higher rate of 34 per cent. Without your tax file number being provided, the super fund will not be able to accept ‘personal’ contributions. You may also be eligible for other benefits like super co-contribution.”

Tamara also notes that it’s best practice to clearly show the super payments you have contributed to your personal super within your business accounts. “Have your BAS agent set up a separate super expense and liability GL (general ledger) code in your chart of accounts, separate to employee super,” she says. “You and your tax agent can then track the amount easily for the purpose of ensuring you do not exceed your maximum contribution limits (contribution cap) for tax purposes. The payments will then appear on your profit and loss report for record-keeping and reporting purposes.”

It's also a good idea to ask your tax agent for advice regarding your maximum limits for tax deduction purposes, to ensure you don’t exceed the limits and attract extra tax – especially if you’re receiving super contributions from other income means.

Now that tax time is officially here, you’ll also need to let your super fund know that you intend to claim your personal super contributions as a deduction within your business. You need to do this after June 30th, and before you or your tax agent prepares and lodges your tax return. You can do this by filling out this form on the Australian Taxation Office website, and submitting it to your super fund. “Once the super fund has processed it, they will forward you an acknowledgement letter. You can include this letter with the documents you provide to your tax agent for your EOFY tax return,” Tamara says.

HOW DOES PAYING SUPER DIFFER BASED ON BUSINESS TYPE AND STRUCTURE?
Say that you’re a sole trader and you’ve contracted your services to another organisation or entity. There are a few factors that will determine whether you are considered an ‘independent contractor’ or a ‘contract employee’, which can impact how super is handled. “It is possible and quite common to have an ABN and be engaged as a contractor and still be deemed as an ‘employee’ for super purposes,” Tamara says. “If deemed an ‘employee contractor’, then the contractor would need to provide the entity engaging their services with super fund choice details, and the entity engaging the contractor would be required to pay super on the GST exclusive labour content of your invoice at the super guarantee rate (currently 10 per cent) to your nominated super fund quarterly.” For more information on super for contractors, swing past the Australian Taxation Office website, and check out the employee/contractor decision tool and the superannuation guarantee eligibility tool.

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