Super funds and the self employed, what are the options?
If you have been doing research on Super funds, super contributions, super employer contributions and co-contributions (if you would like more information on any of these terms do a search on our home page www.cleversuper.com.au ) you might be justified in thinking that the government has not designed super funds with self employed people in mind.
It is true that the government has designed super funds and the whole superannuation system with low to middle class (whatever that actually means) people in mind. However most self-employed fall into this category and only a small percentage of self employed people are wealthy, so what are your super fund options if you are self employed?
The Government does not require self employed people to contribute towards a super fund. However it is just as important to plan for your retirement (perhaps even more important) when you are self employed or employed by someone else.
You could or even should view Super funds as a form of retirement savings while you claim tax deductions on these contributions. Just the fact you can deduct super contributions from your tax is an immediate profit for you. This is because taxes you save today are worth much more than the same amount of taxed paid in 10, 20 or 30 years in the future where inflation will have reduced the buying power of the money you save and can spend today.
The first step you must make if you are self employed and are considering using super as a retirement savings plan is to make sure your chosen fund complies with government requirements, a good tool for this is the Australian Tax Office Super Lookup application. This application will supply information on your chosen fund so you can confirm it is a complying fund.
Your second step is to find out how much help you can get from the government towards your super fund. As from the 1st of July 2007 self employed people who earn an income from running a business either as a sole trader or in a partnership can be eligible for super co-contributions. As you probably already know super co-contributions are the contributions the government makes towards your super fund when they match any personal contribution you make. There are some requirements you must meet in order to qualify for super co-contributions.
You must either have:
1) Eligible employment
2) Run your own business
3) or a combination of both.
Income from a business only includes income you receive as a sole trader or in a partnership not trust distributions.
Another possibility you must not forget when you are self employed is that you might be eligible for employer contributions even if you are considered self employed. For instance if another person or company employs you in a contract that is basically or mostly for labor, the employer or contractor might be required to pay super contribution towards your super fund.
If you are self employed planning for your retirement is a must and super funds might just be the way forward for you. Find out where you stand in the superannuation program and start growing your super as soon as possible.