SMSF Tips for Contractors & the Self-Employed

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Being your own boss and able to work at your own pace, with clients you choose and in time frames you determine, is a real blessing. But, as much as it’s good not to answer to anyone but simply bother to deliver satisfaction for your clients, as self-employed or a contractor, you have more obligations and things to think of. One such is your retirement plan. At one point in your life, you are going to need to retire, which means you have to take care of the income for your golden days.

Self Employed Super

Since you will be the one responsible for arranging everything for your retirement period, it is good to be familiarized with the basic laws and rules of how everything goes. A self employed super plan should be worked well and implemented correctly so that you enjoy all the advantages of it. If you feel like you don’t have the skills or the time for entering this funds managing area, go with the easier option – hire an SMSF professional to help you. If however, you decide you want to do it all by yourself, have these few things in mind.

The tax advantages

Income from superannuation is taxable, which means you will have to take care of paying your taxes since there is not going to be an employer to cut that amount from your monthly pay-check. The tax rate for the superannuation income is 15% up to certain contribution limits. Also, if at some point you decide to sell your business and put your proceeds in Superannuation, you can enjoy a lot of tax exemptions.

Choose your investment strategy

Self Managing Superannuation Fund or commonly known as SMSF is a really convenient thing to do, when retirement is in question. Once you start putting a certain amount of money away for retirement purposes, you should start thinking about how to multiply them. Basic rule of money-managing in finance is never ever leave your money under the mattress. You should invest it in anything: real-estate, stock market, antiques, noble metals in order to push the overall capital market and have your money multiply. With a self employed super fund, you get to choose where you want your money to be invested, which is a huge advantage as well as responsibility.

Property investments

The SMSF can buy properties, either residential or commercial ones. However, if you do buy a residential property, you or any family member can not live in it. This is a good practice if you have to lease back. Basically, you would be paying rent to your future self.

Limits

There are limits in running your own self employed super program which you should be familiarised with to avoid being penalized. Limits mainly refer to the amount of money you can put in the fund as concessional contribution. For instance, if you’re 49 years old or over, the maximum concessional contribution is $30,000. And if you’re 59 or over, your maximum contribution is $35,000. The maximum non-concessional contribution is $180,000.

Business planning

Your business can’t thrive if you don’t plan effectively in advance. Determine your financial and operational goals well in order to be able to develop an action plan. This way you can minimise risks and know all your options when tough times come.