How does superannuation work when I’m the boss?

September 4, 2023

Share This

As a business owner, you wear many hats, from managing day-to-day operations to making strategic decisions. One crucial aspect of your financial affairs is superannuation, which can often be a complex topic to navigate. Unlike employees who have their super contributions managed by their employers, business owners need to take charge of their own superannuation. It’s not always clear if super is compulsory when running your own business and paying yourself, so it’s important to know what you are legally obligated to do.

You may not have to pay yourself super depending on your business structure. If you’re self-employed as either a sole trader or in a partnership, you generally don’t have to make super guarantee payments for yourself. So any super you pay to yourself will be up to you, rather than a legal requirement. On the other hand, if your business employs you and you draw a wage from the business, then you may be legally required to pay yourself super.

These contributions are based on a percentage of your ordinary time earnings. From 1 July 2023 the minimum contribution rate is 11%, but the rate is currently scheduled to go up 0.5% each year until it reaches 12% from 1 July 2025.

Ordinary times earnings are the gross amount you earn, including Directors’ Fees. A list of payments that are (and are not) included can be found on the ATO website.

As long as the super contributions are paid on time they are tax deductible for the business, which can be an effective way to reduce your tax bill. However there are limits to how much you can put into super and claim a tax deduction so it is important to stay within the limits.

Alternatively sometimes, especially in the early years of a business, business owners may prefer to only pay the minimum super (if any) in order to maximise cash flow. However remember the most compelling reason to start contributing to your super early is the power of compound interest. Compound interest allows your investment to grow not just on the initial principal but also on the interest that accumulates over time. The longer your money is invested, the more it benefits from compound growth. By starting young, you give your investments more time to compound, which can result in significant wealth accumulation by the time you retire.

The risk is that while you may have the cash flow to contribute more super in future years, the rules may not permit you to. For example, there is currently the unused contribution cap rule that allows you to catch-up super when you did not make the maximum super contributions eligible for a tax deduction in the previous 5 years, but that is only available if your total super balance is less than $500,000.

Another thing to consider is that you may be able to use your super to purchase a business premises for you to operate out of if you have a self-managed super fund (SMSF).

Navigating superannuation as a business owner can be complex, so don’t hesitate to seek advice from us as everyones situation is different and there are many factors in play. While your business may be one of your biggest assets, it is not your only asset. With careful planning and diligence, you can secure a comfortable retirement and enjoy the fruits of your hard work.

Business Advice
Andrew Sampson Accountant Accelerated Prosperity
The Author
Andrew Sampson
Andrew has dedicated his career to advising private clients on their financial and tax affairs for over 20 years and takes pride in going the extra mile to see you and your business prosper.
Notify of
Inline Feedbacks
View all comments
Subscribe to our newsletter



Why you should lodge a Fringe Benefits Tax (FBT) return (even if you don’t have to)


New FBT exemption for electric vehicles


The ATO’s New Working From Home Deduction Rules