Super for self-employed

Superannuation for self employed

As a self-employed business person, you are not required to contribute to a super fund. However, you may wish to consider super as way for your retirement.

From 1 July 2007, most self-employed people will be able to claim a full deduction for contributions they make to their super until age 75. You may also be eligible for the Super Co-contribution payment.

You also need to make sure you give your super fund (or ensure your super fund has) your tax file number, otherwise: -

• Your super may be taxed an additional 31.5% and
• Your fund won't be able to accept member contributions from you, which may mean you'll miss out of any super co-contributions you may be eligible for.

Please note: More information on these changes to super is available here on Australian Taxation Office (ATO) website to help you make your decision.

You have a wide choice of possibilities:

• insurance companies;
• banks;
• other financial institutions.

These are generally "public-offer" funds, which means they accept contributions from the public at large.

When you are choosing which fund to use, you should consider:

• the administration fees;
• the investment performance and the institution's reputation;
• insurance cover options etc.

You can also do-it-yourself in a self-managed fund.

You will need to get information about this from the fund, but in general you can pay an insurance premium to cover this. It should include benefits for total and temporary disability. Usually the premium is simply deducted from your account balance.

This is usually available in a public-offer fund, although changing investment strategies can involve an additional administrative charge.

Also your participation in this is usually limited. For example, you may be able to choose between stable investment or more risky international equities. The trustee makes the rest of the decisions.

You can set up your own fund, which is called a "self managed fund".

This fund must have fewer than five members (for example, a husband and wife and two children) and give control and responsibility for investment and administration to the members. It is regulated by the Tax Office. Note, the members must be trustees of the fund.

If for some reason, one of the members of the fund cannot be a trustee then, from July 1999 this fund will be called an "approved trustee funds with fewer than five members". This type of fund continues to be regulated by the Australian Prudential Regulation Authority but it does not have to comply with all the requirements of larger funds (for example, providing reports to members).

As a ball-park figure, experts suggest you should have a superannuation balance of al least $70,000 before setting up your own fund.

Make sure you get the advice of an accountant about this