Super for the self-employed and freelancers
Super can be tricky if you're self-employed or a freelancer. But you deserve the same financial security and comfort in retirement as 'traditionally' employed Australians. Media Super understands the unique challenges you're facing and can help you understand your rights and get your super sorted.
Superannuation can be tricky if you’re self-employed or a freelancer.
Your income might vary from month to month. You’re balancing immediate costs with saving for the future. You might not be aware of your rights or responsibilities around super. And sometimes you just might not have the time to deal with more admin.
We get it. But we think you deserve the same financial security and comfort in retirement as ‘traditionally’ employed Australians.
We’ll take you through the basics, how can you build your retirement savings, and some tax considerations.
Who pays your super
All employers are required to make superannuation contributions on behalf of eligible employees; but if you’re self-employed, who is responsible for your contributions? Chances are it’s you.
If you’re receiving income as a freelancer or sole-trader, generally the responsibility for making super contributions is yours. These are known as voluntary contributions or after-tax (non-concessional) contributions.
If you’re employed by your own company (i.e. your business is registered as a company for tax purposes), then the company is required to make the 10% contributions on your behalf.
If you’re undertaking contract work, you may be eligible for employer contributions depending on the structure of the contract and working arrangements. The ATO has detailed information on when contractors should be paid super, as well as a handy tool to help you determine if you should be getting paid super by an employer.
If you’re a performer or involved in performances, film, TV or radio you may be deemed to be an employee for superannuation guarantee purposes and the company engaging you is responsible for making super contributions on your behalf.
How much do you have to contribute
As a freelancer or sole-trader there is no minimum amount you’re required to contribute to your super; however, it’s a good idea to try and pay yourself the same 10% that traditionally employed workers get. That might not be realistic, depending on your situation and income.
A good way to look at super contributions is to consider them as another standard business cost that you need to include in your budget. And if 10% isn't doable, start with a smaller percentage that you can afford.
How to make contributions
If you are self-employed, any contributions made to your super account will be after-tax contributions. However, you are able to claim a tax deduction for these contributions; see the tax section below for more information.
The easiest way to make after-tax contributions is BPAY® through your bank account. You can set up a regular payment or make a one-off payment. You can find your unique BPAY® details – biller code and reference number – on your Media Super member card or digital card, or by logging into your online account and heading to the 'personal details' page.
If you are a making a one-off contribution to your Media Super account, you can mail us a cheque along with a completed Voluntary contribution form.
Being self-employed or freelance already comes with a range of challenges; but with Media Super, being worried about insurance isn't one of them.
Unlike many other funds, Media Super insurance covers self employed and freelance members. And we provide cover for many occupations across the media, arts and entertainment industries that other funds won't cover.
In addition to the general tax rules for super, there are a few extra options that you may be able to take advantage of if you're self-employed or a freelancer.
Claiming a tax deduction for super contributions
As we mentioned above, if you are self-employed and you make contributions to your super, you can claim a tax deduction.
You’re able to claim a tax deduction for all your super contributions in your tax return; however, the ATO will apply additional tax if your super contributions exceed the relevant before and after-tax contributions caps.
You can only use this deduction to reduce your taxable income to nil – you can't add to, or create a loss for, your business through contributing.
Everyone's circumstances are different and you may want to speak to your accountant or registered tax agent before making a claim to ensure you're claiming the right amount.
Visit How super is taxed for details and how to claim.
Income averaging is designed to prevent you from being taxed at higher tax rates in a year when your income may be above average. If you're eligible, it allows you to pay tax based on your 'average' income over the previous five years.
There are very specific conditions you have to meet to be eligible for income averaging. Please visit the ATO's website for full details.
You may want to speak to your accountant or registered tax agent to make sure this tax strategy is right for you.
Small business and capital gains tax
If you operate a small business, whether as a sole trader, partner in a partnership or under a trust or company structure, you may be entitled to concessions to reduce the capital gains on the sale of active assets of the business.
If you sell off an asset that qualifies for the Retirement exemption, you have the option of contributing all or some of the exempted capital gain to super, subject to a lifetime limit of $500,000. The amount of the capital gain that is contributed to super will not be treated as a concessional or non-concessional contribution, provided the contribution counts towards and does not exceed your lifetime CGT cap.
For more information about capital gains concessions for small business, including the Retirement Exemption, please visit the ATO's website.
Consolidating your super into a single account
If you've worked as a freelancer, chances are you may have super in more than one fund. Each super account will likely have administration and investment fees attached to it, which means you could be paying fees for multiple accounts unnecessarily. It's worth taking the time to consolidate your super into a single account so you can stop paying multiple fees. We can also help you track down any lost or unclaimed super you may have.
We're here to help
Media Super has been working with our self-employed and freelance members for more than 30 years. Our team understands your unique needs and can help you get your super sorted. From simple questions to helping you choose an investment option or sorting out your insurance cover, find out how our team help.