Small business owners not paying super

Posted by 05/08/2020 News and advice No Comments


Super is one of the best methods towards saving for retirement. If you are self-employed or work as a contractor, paying yourself super is an ideal way to plan for the future.

But it’s a fact that many small business owners put their super at the bottom of their priority list, due primarily to other financial needs of running a business.

Ultimately, this means that small-business owners have significantly less super than people who aren’t small-business owners. Many small business owners also rely on their business to be their super as they tend to put their money into their businesses not their super funds.

The plan – or the hope – is for their retirement to be funded by any proceeds when they sell their business. Unfortunately, expected proceeds from the sale of the business may not happen due to business collapse, undervaluation, or timing.

Does your business setup mean you legally need to pay yourself super?
If you were working for someone else, your super contributions would be paid by your employer. When you’re running your own business, and paying yourself, it’s not always clear if super is compulsory, and it’s important to know what your legally obligated to do.

Depending on the structure of your business, you may not have to pay yourself super. For example, if you’re self-employed, a sole trader or in a partnership, you generally don’t have to make super guarantee payments to yourself.

So any super you pay to yourself will be up to you, rather than a legal requirement.

However, if you’re employed by your business under a traditional PAYG setup i.e. you draw a wage from the business, then you may be legally required to pay yourself super.

Super has the advantage of preferential tax treatment, meaning you may pay less tax on earnings within super, and you can often get better investment returns than a bank savings account can offer.

A standard contribution of 9.5% of before-tax income will allow you to plan for life after work, and as an incentive for paying yourself super, you may be entitled to a full tax rebate on your contributions. You may also be able to increase your contributions through concessional contributions.

As a business owner you can, in some cases, claim a tax deduction for contributions you make to your own super. These contributions should come from your before-tax income, and can be up to $25,000 per year. This is called a concessional contribution.

Give us a call to find out your legal obligations and options with regards to super.