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18 June 2013

Superannuation for Sole Traders and Partnerships


If you're self-employed - that is, a sole trader or a partner in a partnership - you are not obliged to make super contributions to a super fund for yourself. However, you may want to consider super as a way of saving for your retirement. If you're self-employed, you may:

  • be able to claim a full tax deduction for your super contributions

  • be eligible for the Low Income Super Contribution (LISC)

  • be eligible for the super co-contribution


Low Income Super Contribution (LISC)

If your adjusted taxable income is less than $37,000 the government will also pay an extra 15% of your super contribution into your super fund. You will need to make sure that the super fund has your Tax File Number and that at least 10% of your income comes from employment or your business, or a combination of both.


Super co-contribution

If you don’t claim a tax deduction for your super contributions, you can apply for the super co-contribution instead. You can only claim for one or the other, not both. Unlike claiming the super contribution as a tax deduction, the co-contribution will be paid directly into the super fund. Please note that the government has currently proposed the following changes to the co-contribution:


  • the maximum co-contribution entitlement will be $500

  • the matching rate to be reduced to 50%

  • the lower income threshold will remain $31,920

  • the higher income threshold will be reduced to $46,920.


Should I claim my super contributions as a tax deduction or as a super co-contribution?


The answer depends on your taxable income and the amount of contribution made to your super fund.


For example, let’s say you make a $1000 contribution to your super.  


If your taxable income is more than $46920, your only option is to claim it as a tax deduction.


If your taxable income is less than $31920, you may be better off claiming the co-contribution as you would receive $500 extra in your super fund, compared to only approximately $150 benefit of claiming it as a tax deduction (excluding medicare levy).


If your taxable income is between $31920 and $46920, or if you have made a super contribution of more than $1000, you would be best to contact us to discuss which option would be most beneficial for you.

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