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While there are many perks to being self employed one downfall is that there is no one to make automatic payments into your chosen super fund for you. The responsibility of funding your retirement rests entirely with you.

Research by the Association of Superannuation Funds of Australia (ASFA) shows that a large number of self-employed Australians have little or no super, and no other retirement savings.

According to ASFA, although self-employed people comprise over 10% of the paid labour force, they have relatively low levels of super. Around 26% have no super, while a further 53% have super balances of less than $40,000.

Many self-employed people believe the sale of their business will fund their retirement but while this may work for some, the recent GFC has shown that it’s not always a fail proof method. Life can throw up the unexpected and if this means you are unable to sell your business when and how you planned or for the price you were expecting, your retirement dreams may be thrown into disarray.

Making regular super contributions throughout your working life while self-employed can give you the peace of mind of knowing you’ll have enough money to see yourself through retirement irrespective of a smooth and profitable business sale.

So if you’re self-employed and unsure about super, here are some things to consider.

Tax deductions
If you’re under 75, you may be able to claim a tax deduction for contributions you make into your account. To be eligible you must earn less than 10% of your total income from employment as someone else’s employee. If you’re under 50 you can claim a full deduction for contributions up to $25,000. If aged 50 or over you can claim up to $50,000.

How do I claim a tax deduction?
If you intend to claim a tax deduction on your self employed contributions you will need to complete a Deduction for personal super contributions form (NAT 71121). This is an ATO form that you’ll need to complete each year to let your super fund know which contributions you want to claim a tax deduction for. You can either download this form from the ATO website www.ato.gov.au or ask your super fund to send you a copy.

I own a company. Am I eligible?
If you own a company, super contributions made by the company are treated as employer contributions, so will usually be eligible as tax deductions for the company. Check with your accountant or the ATO if you have further questions.

What happens if I don’t claim a tax deduction?
If you don’t claim your contributions as a tax deduction they will be regarded as voluntary contributions. If this is the case, and you are eligible, you may also be eligible for a Government co-contribution.

What about insurance?
Another important thing to consider if you are self-employed is how your income and livelihood might suffer if you are unable to work due to illness or injury. 

Most super funds offer death, terminal and permanent disability and income protection insurance. There are also a number of benefits if you take out insurance cover through your super fund. Firstly, and perhaps most importantly for your back pocket, your premiums are deducted directly from your super fund member account. This means it’s more tax effective as premiums don’t come out of your disposable income.

Plus because super funds buy cover for all members, they get bulk discount rates from their insurer so you receive the benefit of scale. This means that the premiums you pay for the cover through your super fund are generally cheaper than the rate you could get outside super. It also means that in most cases you can afford a higher more appropriate level of cover through your super fund for the same price of reduced cover through a retail insurer.