July 1 2024

Super for self-employed people and sole traders

Just because you work for yourself, doesn’t mean you have to go without the security and comfort that super can bring when you reach retirement.

Being your own boss can be thrilling, scary, and brilliantly life changing. But if you’re self-employed – as a contractor, sole trader or a business partner – it can be hard work navigating the stuff an employer would normally take care of, like your super.

How does super work for self-employed people?

While most employees receive mandatory super contributions from their employer(s), if you’re self-employed, you generally don’t have to pay super guarantee for yourself. But you can choose to pay into your super fund if you want to. You also have the freedom to choose how much (up to an annual cap), how often, and when to contribute to your super.

Most self-employed people can’t salary sacrifice – or make super contributions from their pre-tax salary – as they aren’t an employee. 


No TFN? No super

If you want to make after-tax (also called ‘personal’) contributions as a self-employed person, your super fund can only accept your payment if it has your tax file number (TFN).

Do self-employed people have to pay super?

It depends on what kind of self-employed person you are.

If you’re a sole trader or in a partnership you have the option to pay your own super. You can pay your voluntary contributions as a regular direct debit from your personal bank account or as a lump sum every now and then. You can decide whether you want to claim a tax deduction on your own super payments or not. It’s important to have a chat about this to your financial advisor or super fund – both options have their pros and cons.

If you’re a contractor, it depends on your agreement or working arrangements with the company that you’re doing work for. You may pay your own or you may be eligible for super guarantee contributions from the company. In other words, the company you’re doing work for may be obliged to pay into your super, even though you’re not a full-time employee. Find out more about how contractors can be considered employees for super purposes and see where you fit in on the ATO website. It could also be a good idea to check your contract or speak with your company contact.


Am I an employee or self-employed?

To work out whether you’re considered an ‘employee’ and, therefore, eligible for super guarantee contributions, the key is to look at the actual working arrangement you have with the company or person you’re doing the work for, not just the paperwork. Check the ATO website for more information

Case Study: Libby’s story.

Libby’s a freelance graphic designer. She creates logos for all sorts of design and advertising firms. She has a contract with Superstar Design to work 10 hours per week, at an agreed hourly rate, and she must do the work herself. She has an ABN and sends Superstar a monthly invoice for her hours.

Even though she’s a freelancer, Abby has agreed in her contract with Superstar that she is considered an employee because:

  • her contract is for the labour and skills she provides
  • she is paid for the number of hours she works
  • she does the work herself.

This means that Superstar needs to pay SGCs for Libby in addition to her pay. 

If you’ve registered your business as a company for tax purposes (i.e. you pay yourself a wage or employ people), your company may be obliged to pay the employer superannuation guarantee contributions on your behalf, if you’re considered an employee for super guarantee purposes. Check out the ATO website for more information.

Is your super all over the place?

As a freelancer or contractor, you’ll likely have worked for multiple companies, and may have super in various funds, resulting in multiple fees and insurances. If you combine your super, you could avoid doubling up on fees and insurance premiums.

Depending on which fund you consolidate with, it might result in loss of benefits such as insurance cover, reduced investment performance and higher fees. So before combining your super, make sure you compare all your options. Check out the fees and costs of your other fund plus any benefits that would be lost. Make sure your other fund knows about any contributions you intend to claim a tax deduction for, before combining. If you have any questions, speak to a licensed financial adviser or visit the ASIC MoneySmart website for more information.

If you think consolidating your super with Rest is right for you, we can help you find your lost super and put it all in one place, to help you make the most of your retirement savings. 

How much super should I pay myself?

If you do decide to make voluntary super contributions, you can pay as little or as much as you like, up to an annual cap (see below). The right approach will be different for everyone, depending on what you can afford and your retirement goals, so it’s a good idea to seek financial advice.

How do I make a super contribution for myself?

It’s easy to contribute. Set up a regular payment or make a one-off contribution using BPAY® via your bank account. If you’re a Rest member, your Rest biller code and reference number are on your account – log on online or use your Rest App. 

Deductions and caps on super contributions

If you choose to make a personal contribution from your after-tax income, you may be able to claim a tax deduction for it.

If you want to claim a tax deduction, make sure to submit a ‘Notice of intent to claim or vary a tax deduction’ form before you lodge your tax return for that year. Wait for your fund to confirm before claiming your deduction with the ATO at tax time. Do note though that before you do anything, it’s important this decision is based on sound financial advice that’s right for you.

The government has annual caps in place on how much you can contribute every year. At a glance:

  • the current concessional (before-tax) contribution cap is $30,000
  • the current non-concessional (after-tax) contribution cap is $120,000.

Some things to keep in mind

  • If you exceed a contribution cap, you could be liable to pay extra tax. However, you may have the option to carry forward unused concessional contributions or bring forward future non-concessional contribution caps if you are eligible.

  • If you claim a deduction on your after-tax contributions, it will count towards your concessional contributions cap.

  • To be eligible to make after-tax contributions, your total super balance must be less than the general transfer balance cap on 30 June of the previous financial year. This is $1.9 million for both the 2023-24 and 2024-25 financial years.

  • From 1 July 2022, if you are under 75 you will no longer need to meet the work test to make or receive non-concessional super contributions and salary sacrifice contributions. If you are aged 67-74 years, you will however be required to meet the work test in order to claim a personal superannuation contribution deduction.

These figures could change, so speak with a financial advisor or keep your eye on the news and ATO website. 

Want to learn more?