Resources

blog, Managing a Business, Managing Finances

Sole Trader Superannuation: What You Should Know

Colin Lua

16 mins read

Published:

13 May 2025

Updated:

16 May 2025

Receive Our Best Content Straight to Your Inbox

document.addEventListener("DOMContentLoaded", function() { document.getElementById('subscribetonewsletter1')?.addEventListener('click', function() { fireEvent('AU_Meeting_CTA_Popup_Subscribe_to_newsletter_1'); }); });

Being your own boss as a sole trader? Awesome freedom! But it also means you’re in charge of everything—including sorting out your retirement nest egg. Getting your head around sole trader superannuation now can seriously pay off down the track.

Unlike folks in regular jobs, super doesn’t just happen automatically when you’re running your own show. It’s up to you to understand how it works and what your options are. Nailing your sole trader superannuation is key for your long-term financial well-being and hitting those retirement goals. We can help make it simple.

Confused by your sole trader superannuation? Let us simplify them.

**What is superannuation anyway?**

Think of superannuation (or ‘super’) as money you stash away while you’re working, so you’ve got funds ready for retirement.

If you work for an employer in Australia, they usually have to put a slice of your pay like a salary sacrifice into a super fund for you. That’s called the Superannuation Guarantee (SG) – it’s the minimum the law requires.

Your super fund invests this money over your working life, aiming to grow it bigger for when you retire. Plus, the government offers tax perks to encourage you to top up your super savings. It’s basically a smart, tax-friendly way to build your nest egg for later life.

Do sole traders have to pay superannuation?

It’s a question lots of sole traders ask: “Do I have to pay myself super?” Usually, the answer’s no. Because you’re your own boss (not technically an ’employee’ of your business), the usual Superannuation Guarantee (SG) rules don’t automatically apply to you. With this, it’s also worth noting that sole traders don’t have superannuation fund ABNs.

So, you’re generally not legally required to make super contributions for yourself out of your business earnings. The compulsory super system is mainly set up for traditional employer-employee setups.

But, things change if you hire people. If you pay staff (and sometimes certain contractors), you’ll likely need to pay the SG for them, just like any boss. The ATO website has all the official details on your obligations for employees.

Even though paying your own, as one of the self-employed people, super isn’t compulsory when you’re a sole trader, it’s definitely worth thinking about. Planning for retirement is crucial for everyone, no matter how you work!

Consequences of Late Superannuation Payments: A Guide

Why bother with sole trader superannuation contributions?

Running your own business keeps you flat out, right? It’s easy for planning retirement to slip down the list when cash flow is king. But adding money to your own super as a sole trader has some serious upsides you don’t want to miss.

Here’s why it’s worth doing:

It’s Your Future Fund: Since there’s no boss paying super for you via the Superannuation Guarantee (SG), it’s up to you to build your retirement savings. Putting money into your super helps grow that essential nest egg for later life, meaning you might rely less on the Age Pension.
Potential Tax Perks: Contributing to your super could be a smart tax move. You might be able to claim your contributions as a tax deduction, which can lower your taxable income right now. So, you invest in your future and possibly cut your current tax bill.
Long-Term Growth: Regularly adding to your super gives your money more time to potentially grow through investment returns over the years. Think of it as planting seeds for your future self.

How sole traders can contribute to super

Okay, so how do you actually pay super for yourself as a sole trader? Since there’s no employer doing it, you make contributions directly into your own super fund. These are usually just called ‘personal contributions’.

You’ve got flexibility here. You can generally choose the super fund you want to contribute to whether that’s an industry fund, retail fund, or even setting up your own self-managed super fund (SMSF).

You also get to decide how much and how often you chip in, although there are limits (called ‘contribution caps’). Set up regular transfers or add lump sums when business is good whatever works for your cash flow. That flexibility is super handy when your income isn’t always predictable.

One key thing: these personal contributions fall into two main' types—'concessional' and 'non-concessional'. Which type they are affects how the tax works and if you can claim a deduction.

Concessional contributions explained

So, what are ‘concessional contributions‘? Think of these as super payments that get a tax break on the way in. They’re usually taxed at just 15% inside your super fund. That’s often much lower than your normal income tax rate, meaning you could save on tax now.

As a sole trader, when you make personal super contributions and then claim them as a tax deduction, those count as concessional contributions. It’s a common way sole traders add to their super.

Just keep in mind there’s a limit each financial year: the ‘concessional contributions cap’. It’s important to track how much you’re putting in this way, because going over the cap can mean you have to pay tax in extra.

The exact cap amount can change, so it’s always best to check the latest figures on the ATO website.

Non-concessional contributions explained

Then there are ‘non-concessional contributions’. These are super payments you make using money you’ve already paid income tax on (like money from your bank account after tax). Because the tax is sorted beforehand, these contributions aren’t taxed again when they hit your super fund.

You might wonder, “Why add money this way if there’s no upfront tax deduction?” Good question! People often use non-concessional contributions if they’ve already maxed out their concessional cap but still want to give their super savings an extra boost.

Plus, even though the contribution itself isn’t taxed on the way in, any investment earnings that money makes inside the super fund are still taxed at the lower super rate (generally 15% maximum). That can be a better deal than earning investment returns outside super.

Like the other type, there’s an annual ‘non-concessional contributions cap’. It’s important to keep an eye on this limit too, as going over can lead to extra tax. You can find the current cap details over on the ATO website.

Here’s a simple comparison:

Feature	Concessional Contributions	Non-Concessional Contributions
Source of Funds	Pre-tax income (via tax deduction for sole traders)	After-tax income
Tax Deduction Possible?	Yes (if notice provided and acknowledged)	No
Tax in Super Fund (Contributions Tax)	15% (up to the cap)	0%
Annual Cap Applies?	Yes (Concessional Cap)	Yes (Non-Concessional Cap)
Main Benefit	Reduces current taxable income	Boosts super using after-tax money; earnings taxed concessionally

Claiming tax deductions for your contributions

Here’s a big potential win for sole traders: you can often claim your personal super contributions as a tax deduction. This basically turns your contribution into a ‘concessional’ one. The perk? It gets taxed at the lower 15% rate inside your super fund, instead of your usual income tax rate, which can lower your taxable income and the tax you pay for the year.

Want to claim this deduction? You’ll need to follow a few key steps:

Make your contribution: Pay the money into your super fund as usual.
Tell your fund:Before you lodge your tax return (or by the end of the next financial year, whichever comes first), you must officially tell your super fund you intend to claim a deduction for that contribution. You do this using a specific form, often called a ‘Notice of intent to claim a deduction’.
Get the nod: Your fund will process your notice and send you back an acknowledgement. Wait for this confirmation before you claim the deduction on your tax return—it’s essential!

The ATO website has the full rundown on the process, eligibility, and the exact forms you need.

Just remember: If you skip that step of notifying your fund and getting their acknowledgement, your contribution stays ‘non-concessional’, and you won’t be able to claim the tax deduction for it.

Setting up and choosing a super fund

Need to pick a super fund? Maybe you’re starting fresh, want to bring all your super together, or just need one for your sole trader contributions. No worries, Australia’s got plenty of options.

You’ll mainly come across:

Retail funds: Often run by banks or big investment companies.
Industry funds: Used to be tied to specific jobs, but most are open to everyone now. Known for returning profits to members.
Self-managed super funds (SMSFs): These give you full control, but be aware they come with serious responsibility and you need to know the rules inside out.

Joining most funds is pretty easy, usually just an online form needing your details and Tax File Number (TFN). Giving your TFN lets the fund accept your payments and helps the ATO keep tabs on your super (and find any lost bits you might have!).

Choosing the right fund is a big deal for your retirement savings. Here’s what to weigh up:

Track record: How has the fund performed over the long run (say, 5+ years)? Remember past performance isn’t a guarantee for the future, but it gives you an idea.
Fees: How much will they charge you? Lower is generally better. Look at admin and investment fees.
Insurance: What cover do they offer (like income protection if you can’t work, life cover, etc.) and does it suit you?
Investment options: Do they offer choices that match how comfortable you are with investment risk?

Understanding contribution caps

We touched on contribution caps before—let’s take a closer look, because sticking to them is key to avoiding extra tax. These caps limit how much you can put into super each financial year without potentially getting hit with a higher tax bill. It’s your job to keep track of all contributions made for you, across all your funds.

Concessional (before-tax) contributions cap

This cap applies to money going into your super before tax, or contributions you claim a tax deduction for.
For the 2024-25 financial year, this cap is $30,000.
Go over this, and the excess amount could be taxed at your usual income tax rate (plus interest), though you might be able to pull the excess amount out to lessen the tax hit.

Non-concessional (after-tax) contributions cap

This one’s for contributions made with money you’ve already paid income tax on.
For the 2024-25 financial year, this cap is $120,000.
Exceeding this cap can also mean paying significant extra tax (up to 47% on the excess). You generally have the option to release the excess contributions to avoid this top tax rate.
Good to know: If your total super balance was under $1.9 million on 30 June last year, and you’re under 75, you might be able to use the ‘bring-forward’ rule. This could let you contribute up to $360,000 over three years, depending on your exact balance. The rules here can get tricky, so check the details.

How to keep track:

The easiest way is usually through your MyGov account linked to the ATO. You can see contributions reported by your funds and check your cap situation there.

Getting your head around these caps is essential for smart super planning as a sole trader. Because the rules and cap amounts can change, always check the ATO website for the latest, official figures and details.

Carry-forward concessional contributions

Didn’t use up your full concessional (before-tax) contribution cap in previous years? There’s a handy rule called ‘carry-forward contributions’. It means you might be able to ‘catch up’ by adding those unused amounts to your cap in a later year.

The main catch? Your total super balance must have been under $500,000 at the end of the previous financial year (30 June) to be eligible. This rule applies to unused cap amounts starting from the 2018-19 financial year onwards.

This can be super useful if you’re a sole trader with income that goes up and down. In a good year, you could make bigger tax-deductible contributions by using up the leftover cap space from leaner years.

Like with all things super, it’s smart to check the full eligibility details on the ATO website or have a chat with a financial adviser to make sure it applies to you.

Carry Forward Concessional Contributions

Boosting your super: Government co-contribution and spouse contributions

Government co-contribution

Here’s a potential bonus for your super if you’re on a low or middle income: the government co-contribution scheme. Think of it as a top-up from the government – basically free money for your retirement savings!

Here’s the deal: if you put some of your own after-tax money into your super, the government might chip in 50 cents for every dollar you contribute, up to a maximum amount each year.

Could you be eligible? Generally, you need to:

Make a personal contribution using your after-tax money (and not claim a tax deduction for it).
Earn less than the upper income limit for the year (for 2024-25, that’s $60,400).
Get at least 10% of your income from running your business or eligible employment.
Lodge your tax return for the year.
Be under 71 at the end of the financial year.
Meet a few other conditions (like having a total super balance below a certain limit – $1.9 million on 30 June 2024 for the 2024-25 year, and not exceeding your after-tax contribution cap).

How much could you get?

The maximum co-contribution from the government is $500 per year.
To get the full $500 for 2024-25, you need to contribute at least $1,000 of your after-tax money AND have a total income of $45,400 or less.
If you earn between $45,400 and $60,400, you might still get a partial co-contribution – the amount reduces as your income gets higher.
Earn $60,400 or more? Sorry, no co-contribution for that year.

The good news? You don’t need to apply. If you’re eligible, the ATO works it out automatically after you lodge your tax return and pays it straight into your super fund (as long as they have your TFN).

Income thresholds and rules can change, so always check the ATO website for the current, official details on the super co-contribution.

Spouse contributions

Want to boost your household’s super savings and maybe snag a tax break? Contributing to your spouse’s super could be an option. If your spouse (married or de facto) is earning a low income, putting some of your after-tax money into their super account might get you a tax offset.

Here’s how the tax offset works:

You could claim an 18% tax offset on contributions you make, up to a maximum offset of $540 per year.
To get the full $540 offset, you’d need to contribute at least $3,000, and your spouse’s income needs to be $37,000 or less for the financial year.
If your spouse earns between $37,000 and $40,000, the offset gradually reduces. If they earn $40,000 or more, there’s no offset available.

There are a few other rules, too. Generally, your spouse needs to be under 75, you both need to be Aussie residents living together, and their total super balance must have been under the limit ($1.9 million on 30 June 2024) at the start of the financial year. The contribution also counts towards their non-concessional cap.

It’s a smart way to help build up super for a partner who might have a lower balance. Just remember, it comes from your money after tax and doesn’t count towards your own contribution caps.

For the full details on eligibility and how your spouse’s income is calculated for this, check the ATO guidelines or chat with a financial adviser.

What about super for your employees?

Hiring help? That’s great! But know this: once you employ people (including eligible contractors paid mostly for their labour), the super rules change significantly for you as a sole trader. You generally become legally required to pay super for them – this is called the Superannuation Guarantee (SG).

Here’s the basics:

Who gets it? Usually applies to your full-time, part-time, and casual employees (check ATO rules for specifics, especially for under 18s or contractors).
How much? The current SG rate (for the 2024-25 financial year) is 11.5% of their ordinary time earnings (OTE). This rate is set to rise to 12% from 1 July 2025.
When? You need to pay this into their chosen super fund at least quarterly by the official due dates.

Crucially: Pay the right amount, to the right fund, by the deadline. If you miss a payment, you can face the Superannuation Guarantee Charge (SGC) from the ATO – this includes penalties and interest, and it’s not tax deductible. Ouch.

You’ll need to pay and report electronically using a system called SuperStream. Small businesses (usually 19 or fewer employees) can often use the ATO’s free Small Business Superannuation Clearing House (SBSCH) to simplify payments until 1 July 2026.

Getting your employer super obligations right is essential. The ATO website has all the detailed info you need as an employer.

Keeping good records

Just like everything else in your business, keeping good records for your super is super important when you’re a sole trader. Make sure you track all the personal super contributions you make during the year. This helps you see how your retirement savings are growing and, just as importantly, keeps you under the contribution caps so you avoid extra tax.

Planning to claim a tax deduction on those personal contributions? Definitely hang onto:

A copy of the ‘Notice of Intent’ form you sent to your super fund.
The acknowledgement letter they sent back confirming they received it.

You’ll need these as proof if the ATO ever asks about your tax return. Good records of your business income and expenses are also key for working out your deduction correctly come tax time.

And if you’ve got staff? Keep clear records of the Super Guarantee (SG) payments you make for them, including:

How much you paid.
When you paid for it.
How you calculated it (based on their Ordinary Time Earnings or OTE).
Which super fund it went to for each person.

The law says you need to keep these employer records for several years. Trust us, having solid records makes tax time way less stressful and shows the ATO you’re doing the right thing if they ever need to check.

What about super for your employees?

Here’s the basics:

Who gets it? Usually applies to your full-time, part-time, and casual employees (check ATO rules for specifics, especially for under 18s or contractors).
How much? The current SG rate (for the 2024-25 financial year) is 11.5% of their ordinary time earnings (OTE). This rate is set to rise to 12% from 1 July 2025.
When? You need to pay this into their chosen super fund at least quarterly by the official due dates.

Getting your employer super obligations right is essential. The ATO website has all the detailed info you need as an employer.

Keeping good records

Planning to claim a tax deduction on those personal contributions? Definitely hang onto:

A copy of the ‘Notice of Intent’ form you sent to your super fund.
The acknowledgement letter they sent back confirming they received it.

You’ll need these as proof if the ATO ever asks about your tax return. Good records of your business income and expenses are also key for working out your deduction correctly come tax time.

And if you’ve got staff? Keep clear records of the Super Guarantee (SG) payments you make for them, including:

How much you paid.
When you paid for it.
How you calculated it (based on their Ordinary Time Earnings or OTE).
Which super fund it went to for each person.

Want to maximise your super deductions?

Sorting super and tax as a sole trader? It’s a lot. Sleek simplifies your accounting, making it easier to track income for super contributions and nail those potential tax deductions. We handle your bookkeeping, BAS, and tax returns, giving you financial clarity and peace of mind. Focus on your business, we’ll handle the numbers.

Conclusion

Taking charge of your sole trader superannuation is one of the smartest things you can do for your future. While you don’t have to contribute to your own super, building that retirement nest egg and grabbing potential tax benefits makes it a great move for most people running their own show.

Now that you understand the different ways to contribute, how to claim deductions properly, what to look for in a fund, the importance of sticking to contribution caps, and keeping good records, you’re well on your way to making super work hard for you. Pop your numbers into a retirement calculator online to get a better idea of what you might need.

Think of it as investing in your future self so you can kick back and enjoy the rewards of all your hard work when you eventually decide to hang up your boots (or just slow down!).

Talk to our Sydney based team today

FAQs about sole trader superannuation

Do sole traders have to pay superannuation?

For yourself: No, as a sole trader, you generally don’t have to make super contributions for yourself. But it’s definitely a smart move for your retirement savings, and there can be tax advantages.

For employees you hire: Yes, absolutely. If you employ people (including some contractors), you must pay the Superannuation Guarantee (SG) for them. This is currently 11.5% of their ordinary time earnings (OTE), paid into their super fund at least quarterly.

How much super should I contribute as a sole trader?

That’s the million-dollar question, isn’t it? There’s no magic number. It depends on your income, your age, and the kind of lifestyle you want when you retire. Some things to consider are:

Your current income and expenses.
How many years until you plan to retire.
Your desired retirement lifestyle.

A financial advisor can give you tailored advice. They’ll look at your specific situation. They can help you work out a plan that works for you. Remember, any amount you put in can make a difference. Every little bit helps you prepare for the future.

Can I claim tax deductions for my super contributions?

Good news! In many cases, yes. As a sole trader, you can often claim a tax deduction for personal super contributions. This can lower your taxable income. It’s a win-win. Make sure you meet the eligibility requirements set by the ATO. There are limits to how much you can claim. So, it’s a good idea to keep good records. This will help you at tax time.

Sleek is the preferred partner of entrepreneurs