Do I have to make superannuation contributions if I'm self employed? What does retirement look like if I own my business? Can I salary sacrifice if I pay my own salary? Superannuation and retirement looks very different for those who are self employed. We are here to answer your most-Googled questions.
If you are working a salary job, your employer is required by law to make a contribution into your nominated super fund each time they pay you. In Australia, this is called the Superannuation Guarantee. However, if you are self employed, the Superannuation Guarantee does not apply to you, and therefore you are not required to make contributions. This means that any contributions you want made will have to be done manually by you. If your retirement plan includes living off your superannuation upon retirement, you will need to set up voluntary payments with your superannuation fund.
If you do set up voluntary contributions to your superannuation fund, they may be eligible for tax deductions. You are likely to be eligible if you are earning over 90% of your income from being self-employed. This is just another incentive to set up regular payments into your nominated superannuation fund.
Retirement looks different to every person, and will even vary based on the nature of your business if you are self employed. If you are the sole worker in the business, perhaps you are a freelance worker or labourer, your income will stop as soon as you hang up the tools. If you have employees working for you, your business is likely to continue post-retirement, as you will be able to take a back seat in day to day operations. If your situation aligns closest with the latter, you may be able to live off profits from your business and fund your retirement that way. However, if this is your plan, it is always wise to have a backup incase things don't go to plan. In this case, you may want to consider making superannuation contributions.
Many self employed individuals will have an investment, or multiple,which they are counting on to fund their retirement. This can be a viable option, however it is recommended to make multiple different investments to rely on, or use investments are only one part of your retirement plan.