This post brought to you by Clime Asset Management
When you work for yourself you miss out on some of the benefits of being an employee, like holiday pay, paid sick days and importantly superannuation. You are not bound by law to make superannuation payments if you are self employed, but it is really important to think about building your super so that you have money to live off in your retirement.
Here are some super tips for mums in business to get you on your way:
Choosing a Super Fund
If you have ever worked for someone else you will have a super fund that was set up when you were employed. You may in fact have several. You can consolidate all of your superannuation funds and roll them into one account. You can also find lost super by going to the ATO’s lost member register.
So how do you decide on the right fund for you? Ask for recommendations from friends, do some research on what funds have won reputable awards and even look into funds available to your specific industry. Also consider the fees you have to pay each year. If all this is too much then consult a professional superannuation or asset specialist.
Make Your Money Work
It’s hard to get excited about putting your money somewhere you can’t access it until you retire. But in order to reap the rewards of investment and compound interest, you need to make it a priority. Leave it too late and you will not have nearly enough to live off in your twilight years. Working for yourself doesn’t mean you can’t pay yourself super. Set aside a nominated amount each month and get it direct debited. You won’t even miss it!
If you are self employed and make your own super contributions before June 30 each year, you can claim them as a tax deduction in that financial year. Contribute up to $25,000/year (if under 50) and only be taxed 15% instead of the full tax rate. That’s a great incentive to pay yourself super!
Many self employed people are not aware that they can benefit from the government’s co-contribution scheme by contributing to their own super. If you earn less than $49,488 per year (before tax) and make after-tax super contributions, you are eligible for matching government contributions. If you earn less than $34,488 (before tax), the government will actually pay 50 cents for every dollar you contribute up to a maximum of $500. Who doesn’t like a great return on their investment that is guaranteed?
There are eligibility requirements so check these before you start and in order to receive the co-contribution you will need to lodge a tax return for the year.
Self Managed Super Funds (SMSF)
Managing your own super fund is an option for those who have a large super balance to make it worthwhile. There are many things to consider before deciding on this option as it is not as simple as you may think. The rewards can be enormous (you have the freedom to invest your money in your chosen asset such as property or art) but you must first factor into the equation things like your time to manage the fund, your financial nous so that correct investment decisions are made, ongoing costs such as legal/accounting/tax advice and all the separate insurances you will need that are often wrapped up with super e.g. income protection. If you are keen on this option then you can also consult an adviser such as Clime Asset Management who can assist with the decision making and administration.
Gaining an understanding of how you can contribute to your super whilst being self employed is a good investment in your future. Ignoring your super fund will leave you with a big gap to fill come retirement, but making some smart decisions now could mean retiring many years earlier.
Make every dollar count and get your money working for you. The earlier you start, the more “super” the outcome!
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