Skip to main content

Super Woman Money

  • Search
Content page

I'm self-employed. How can I maximise my savings?

Q. “I have only ever worked in contracts under an ABN. So how do I manage and maximise savings and super on my own?” Cat

Answer

Great question, Cat.

There are lots of advantages to being self employed – like having the flexibility to choose the contracts that most interest you and the freedom to take breaks between contracts.

But one of the advantages of self-employment – not having a boss to tell you what you have to do – can also be one of the disadvantages.

Employers are required to provide certain minimum benefits to employees, such as sick leave and annual leave, and also to meet compliance obligations like calculating and remitting tax on your behalf and paying the compulsory 9% pa (progressively increasing to 12% pa over the next few years) super contributions.

Working on a contract basis can on the surface appear to be more financially attractive – with a higher daily payment than for the equivalent permanent role. However being self-employed you are taking responsibility for many of these administrative responsibilities which can be daunting.

As you can effectively become responsible for provisioning for your own tax, super and sick leave entitlements, it’s essential that you have a system for keeping track of your cashflow.

But whether you are an employee or working for yourself, it comes down to having – and sticking to – a budget.

Budgeting can seem like a dirty word, but it doesn’t need to be boring or time consuming. There are some great online tools to help you, including accounting programs which offer personal spending tracking, such as Xero. Some banks have built-in budgeting and spending programs as part of their internet banking functionality which automatically categorises all your transactions against your budget, meaning all you really need to do is regularly review the information.

If you don’t know where to start in setting your budget, there is a great new site called peoplelikeu.com.au, which draws on more than a billion bank transactions to give you anonymous data about the spending habits of people in your age, gender, location and income range. This can be helpful in benchmarking your spending relative to your peers.

The most effective way to manage your cashflow is to make it easy and as automated as possible. For example, setting automated transfers directly from your pay each month for your savings, whether that be making super contributions, additional home loan repayments or regular investments.

The way our brains are wired it’s much easier to commit to saving in the future, and harnessing this can make a big difference to your long-term financial health. You can have a look at the success of programs which encourage employees to save future by saving a fixed proportion of future pay rises here.

Finally, just because you are self-employed doesn’t mean that you miss out on the tax benefits of super. If less than 10% of your income is from employment and certain other conditions are met, you can claim a personal tax deduction for contributions made to super, up to the concessional contribution cap, which is currently $25,000 pa. This can have the dual benefit of helping secure your long-term financial independence and also reduce your tax burden right now.

There are a range of people who can help, such as a qualified financial planner, your accountant or a spending coach.

Good luck!

Author: Catherine Robson

Catherine and Affinity Private are representatives of and offer our services on behalf of Apogee Financial Planning Limited ABN 28 056 426 932 Australian Financial Services & Credit Licence No: 230689. Registered Office 105–153 Miller Street North Sydney NSW 2060.

Catherine Robson and Affinity Private have not taken into account any particular persons objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision. We do not warrant the accuracy or appropriateness of any of the third parties or websites referred to above, and no commission or other remuneration is payable from the third parties mentioned above.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.

Q. “I have only ever worked in contracts under an ABN. So how do I manage and maximise savings and super on my own?” Cat

Answer

Great question, Cat.

There are lots of advantages to being self employed – like having the flexibility to choose the contracts that most interest you and the freedom to take breaks between contracts.

But one of the advantages of self-employment – not having a boss to tell you what you have to do – can also be one of the disadvantages.

Employers are required to provide certain minimum benefits to employees, such as sick leave and annual leave, and also to meet compliance obligations like calculating and remitting tax on your behalf and paying the compulsory 9% pa (progressively increasing to 12% pa over the next few years) super contributions.

Working on a contract basis can on the surface appear to be more financially attractive – with a higher daily payment than for the equivalent permanent role. However being self-employed you are taking responsibility for many of these administrative responsibilities which can be daunting.

As you can effectively become responsible for provisioning for your own tax, super and sick leave entitlements, it’s essential that you have a system for keeping track of your cashflow.

But whether you are an employee or working for yourself, it comes down to having – and sticking to – a budget.

Budgeting can seem like a dirty word, but it doesn’t need to be boring or time consuming. There are some great online tools to help you, including accounting programs which offer personal spending tracking, such as Xero. Some banks have built-in budgeting and spending programs as part of their internet banking functionality which automatically categorises all your transactions against your budget, meaning all you really need to do is regularly review the information.

If you don’t know where to start in setting your budget, there is a great new site called peoplelikeu.com.au, which draws on more than a billion bank transactions to give you anonymous data about the spending habits of people in your age, gender, location and income range. This can be helpful in benchmarking your spending relative to your peers.

The most effective way to manage your cashflow is to make it easy and as automated as possible. For example, setting automated transfers directly from your pay each month for your savings, whether that be making super contributions, additional home loan repayments or regular investments.

The way our brains are wired it’s much easier to commit to saving in the future, and harnessing this can make a big difference to your long-term financial health. You can have a look at the success of programs which encourage employees to save future by saving a fixed proportion of future pay rises here.

Finally, just because you are self-employed doesn’t mean that you miss out on the tax benefits of super. If less than 10% of your income is from employment and certain other conditions are met, you can claim a personal tax deduction for contributions made to super, up to the concessional contribution cap, which is currently $25,000 pa. This can have the dual benefit of helping secure your long-term financial independence and also reduce your tax burden right now.

There are a range of people who can help, such as a qualified financial planner, your accountant or a spending coach.

Good luck!

Author: Catherine Robson

Catherine and Affinity Private are representatives of and offer our services on behalf of Apogee Financial Planning Limited ABN 28 056 426 932 Australian Financial Services & Credit Licence No: 230689. Registered Office 105–153 Miller Street North Sydney NSW 2060.

Catherine Robson and Affinity Private have not taken into account any particular persons objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before making any financial investment or insurance decision. We do not warrant the accuracy or appropriateness of any of the third parties or websites referred to above, and no commission or other remuneration is payable from the third parties mentioned above.

The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.