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For most businesses, managing employee super is simply a matter of learning the rules around the Superannuation Guarantee (SG) and making the right contributions for your employees.
But if you’re self-employed, in a partnership or running a small business that’s not incorporated, you need to take a closer look at your super arrangements.
Even if the rules don’t require you to make super contributions, it’s important to think about how you will fund your retirement when the time comes and whether the tax deductions make contributing worthwhile.
Managing employee super
1. Company structure
If you’re self-employed but operate your business under a company or incorporated structure, each quarter you are required to pay the normal SG contribution of 10% for any eligible employees – including yourself – earning over $450 per calendar month (before tax).
This means if you are employed by your business and draw a regular wage using a traditional PAYG structure, you must make quarterly SG contributions on your own behalf into your super account.
The SG rate is currently legislated to rise slowly from 10% to 12% on 1 July 2025 as outlined in the table.
|Financial year when SG rate to increase
As an employer, there is a cap on the employee income on which you are required to make SG contributions. The upper limit of employee income (called the maximum super contribution base) is $58,920 per quarter, which is equivalent to $235,680 a year in 2021–22.
If you or your employee earn above this quarterly limit, you are not required to make SG contributions for any income over this limit.
2. Self-employed or in a partnership
If you operate your business as a sole trader or as a partnership, generally you are not required to make SG payments into a super account on your own behalf.
The responsibility for saving for your own retirement is up to you. So, the decision about whether to make super contributions is yours to make, rather than being a legal requirement.
But just because the law doesn’t require you to make payments towards your super, for most people it’s a sensible idea to make regular contributions from your business income to help save for your retirement.
Who is an employer?
It’s important to note you may be an employer for SG purposes without realising it – even if you are self-employed or using a partnership structure.
According to super law, you can be an employer for SG purposes if you employ someone under a verbal or written contract on a full-time, part-time or casual basis.
Even if you are not using a company structure, according to the ATO you may be employing someone if you:
- Have some control over their work
- Pay them for their labour, even if they have an Australian Business Number (ABN)
- Are responsible for paying their salary or wages
- Have the power to hire or dismiss them
- Are a non-resident employer with employees working in Australia
- Pay them a director’s fee in return for their service
- Are a family company or trust paying salary or wages to family members (including yourself) working in your business.
Contractors or self-employed service providers can be considered an employee for super purposes even if they only work for you on a single project. So, ensure you carefully check the arrangements you have with people undertaking work for you.
Super contributions for the self-employed
If you’re self-employed and decide you want to make super contributions on your own behalf, there are two main ways of doing it. If you pay yourself:
- A wage as an employee of your company, ensure you contribute at least 10% (in 2021–22) of your before-tax income to your super account
- Out of your business revenue, most super funds permit you to send either an annual lump sum or small regular contributions throughout the year as your cash flow permits.
Self-employed businesspeople are subject to the same contribution limits (see below) as regular employees, so it’s important to ensure you don’t exceed your annual contributions cap.
Insurance protection and your super
An often-overlooked benefit of deciding to make super contributions if you are self-employed is the insurance cover available through your super fund.
Generally, super funds can access better prices on death, Total and Permanent Disability (TPD) and income protection cover than an individual, so purchasing insurance through your super fund can be cost effective if you work for yourself.
Most large super funds automatically offer new members set levels of death and TPD insurance cover without needing to undergo a medical examination. This automatic cover can be great for people who may not be able to obtain cost-effective cover outside super due to age or ill health.
Save some tax: Claim a tax deduction for your contributions
If you make super contributions on your own behalf, you may be eligible to claim a tax deduction for the contributions.