We tend to look down on many employees who don't really know what's going on with their superannuation, but in most cases at least something is happening - that's definitely a positive! But how about you as a sole trader/partnership? Or possibly (cough)... a director of a company that doesn't run payroll? Do you have a super account and regularly pay into it?
There are no rules in place stating that self-employed individuals need to have a super account or pay into one. If there is no legislation, then it can't be important, right? Think again!
Super is, well, super important. It may seem a long way off, but have you sat down and thought about how you will fund your retirement when the time comes? Those in paid employment have 9.5% of their gross wages paid into a super fund regularly, this means they already have peace of mind that funds are being set aside for their future needs.
When you are self-employed, it becomes your sole responsibility to set up a super account and put money aside to pay into it regularly. If you already have an account from previous employment, that's great, you can probably just keep paying voluntary contributions into that one. Always check with your super fund though, let them know that you have transitioned over to self-employment because their plans may no longer be compatible with your circumstances; and more importantly, any previous insurances may no longer be valid. If you don't yet have a superannuation account, shop around for the best returns on investments and look into Industry SuperFunds which are run only to profit members. You can find more info on Industry SuperFunds here.
Keep in mind too, the incentives the government has in place to help you build your super. You may be eligible for lower tax rates on super contributions or the super co-contribution for lower income earners. Make sure you provide your tax file number (TFN) to your fund to allow and track these benefits. This will also enable your super balance to be tracked in your myGov account. It is a good idea to check out the rules for the contributions cap too, if you contribute too much super then higher tax rates may come back into play. You can find more info on the super co-contributions and cap here. We highly recommend you talk to your accountant or financial advisor if you intend to claim tax deductions for voluntary super contributions. This may affect the co-contribution and when to lodge your tax return.
Remember to account for your super contributions correctly in your bookkeeping procedures. Super contributions are a personal expense (unless part of payroll when paying the super guarantee). So for tracking purposes it is a good idea to set up a separate owners equity drawings account such as 'owner drawings - super'.
If you'd like some more information or assistance with virtual bookkeeping and accounting services, contact Money Monarch today or make a booking on our website.