The 3 basics of Super when you're self-employed
This article was written by our friends at GigSuper. GigSuper is a superannuation fund for people who are self-employed, and they are offering Deliveroo riders access to an exclusive webinar to understand more about the benefits of superannuation. Find out more below!
Superannuation can be complicated – especially when you’re self employed. You might find yourself wondering if you’re doing it right, if you’re putting enough away, or if you’re paying too much tax.
At GigSuper, we hear these kinds of questions from self-employed people all the time, but we believe that you shouldn’t need to be a finance expert to do super properly when you’re self-employed.
So we want to break down the basics, to help you better understand how to make super work for you.
1. What is superannuation?
Super is a way of saving for your retirement. When you’re self-employed, you should ensure you’re putting enough money into superannuation to support yourself when you’re retired.
As a self-employed person, contributing to superannuation is voluntary. But realistically, when it comes to your retirement, chances are you’ll be better off having more money in your super. Why? Because dollars in the bank means you call the shots.
That’s the power of superannuation, it’s not just a number; it’s about helping you to have the lifestyle you want, even after you’ve retired.
2. When can I access the money in my super?
When you can access the money in your super depends if you’re a permanent resident of Australia.
I am a permanent resident
There are a number of scenarios in which you can withdraw your money from super. The common ones are reaching age 65, as well as reaching preservation age and retiring. Preservation age is the minimum age that your super must be ‘preserved’ until, and this is set by the law.
While it is possible to withdraw your money earlier than this in some circumstances (such as severe financial hardship), special rules apply and GigSuper can help you with this if required.
I am a temporary resident
If you’re a temporary resident (such as a student or a skilled migrant), and you leave Australia permanently, it is possible to withdraw your super. This can be done once you have left Australia where you were in Australia on an eligible visa, and that visa has now expired or been cancelled.
The ATO website can provide more information about eligibility rules and visas, and the process of applying. If you are a temporary resident, we strongly recommend you refer to the ATO website, and/or seek independent tax/financial advice to help you decide whether investing through super is right for you.
3. What is compounding interest?
Compounding interest may sound complex, but it’s actually really straightforward.
If you invest $1000 in an account that pays 5% fixed term interest a year, after a year you’ll earn $50 – giving you a total of $1050.
If you keep that additional $50 in the account, and reinvest the full $1050 for another year at 5% annual fixed term interest, you’ll make $52.50 at the end of the second year, giving you $1102.50 total.
Keep the $1102.50 in for another year and you’ll make $55.13 in the third year.
Whilst those numbers may not look that exciting, when you consider what happens over long periods of time, it’s easy to see why Albert Einstein called compound interest the 8th wonder of the world.
It’s important to note that the power of compounding interest applies to all investments. Not just those held inside super.
But a potential benefit of saving inside super is that the tax rates are often lower than outside super which, over a lifetime of work, allows your retirement savings to compound faster.
Find out more about kick-start saving for your retirement with GigSuper through their exclusive Deliveroo webinar. Check it out on the Portify app!
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