Superannuation

I was just wondering how important is it to pay superannuation?
Is it illegal to not pay super?
I am looking to start investing in property and would rather put my money towards a deposit rather than pay super.
 
If you're a PAYG employee, it's compulsory to have 9.25% of your income go to Super. Employer gets in big trouble if they don't

If you're self employed or a company owner, rules may be a little different.
 
If you run a self-managed superannuation fund, you can access your super & invest in all types of real property, including residential property, commercial property, industrial property and even a farm (under certain circumstances).
 
I am an employer of a small construction company. I pay my workers super but haven't really contributed much to my own super. Should I start paying myself the 9.5% or better to save for deposit.
 
I am an employer of a small construction company. I pay my workers super but haven't really contributed much to my own super. Should I start paying myself the 9.5% or better to save for deposit.

If you feel that you can make more use of the money investing it yourself, by all means do that.

Keep in mind that super contributions aren't taxed (within $25k pa) so what you do needs to be worth more than the basic 9.5%. You can set up a self managed super fund and manage your own investments through this but keep in mind that this can be a costly exercise as well (set-up costs, management & compliance, etc).

The real problem is that super is more complex than most people appreciate. Advice on this topic needs to be very specific and tailored to your needs. Having small business also leads to additional complexities. I don't think you'll get ideal advice from simple question on an internet forum, this is where you need financial advice from a financial planner.

If you intend to invest in property the brokers and forum in general can help, but this is only one consideration in the bigger financial picture.
 
if by a company you mean a Pty Limited company and you are an employee and you pay wages/salary to yourself you will need to pay the super.

If you mean you are a partnership or a sole trader then you don't need to pay super though you could get a tax deduction
 
I am an employer of a small construction company. I pay my workers super but haven't really contributed much to my own super. Should I start paying myself the 9.5% or better to save for deposit.

If you are an employee of your company too then the company is in breach of tax laws. The ATO can penalise you as the Director for this. Its not a choice I'm afraid. There is no compulsory wages you must be paid but if you receive remuneration then 9.5% super is mandatory. You cant chose to ignore this just as you cant ignore employees super either. Directors can be personally liable. There are very few people I know who actually save elsewhere when they don't add to super. They just overlook it all together and never do it.

Be careful about making assumptions about super. Failing to save for retirement may be a mistake. There is nothing wrong with saving elsewhere (eg IPs) but slow and steady super savings are a good strategy to avoid getting to age 60 and being unable to retire. I always encourage investment property owners to also maintain strong super strategies.

I have a self employed client who is 62. She has paid a consistent amount of super (voluntatrily) each year since the early 1990's. She has a SMSF as well. The SMSF owns her offices outright ($900K) and she has $1.6M in super. She didn't have to put a cent to super but chose to. She got tax deductions along the way (33%+) and the fund was taxed at 15% so its very tax effective.

A large number of retirees who are self employed etc approach age 60 with almost no super. This is common in the construction industry for contractors.
I would encourage you to have a discussion about super with CBus before you make any decisions. Ask them to demonstrate the benefits.
 
Thanks Peter jrc and Paul. My company is Pty Ltd and I am an employee of the company so I'm guessing I will have to start paying the super again. I used to pay it every quarter but recently stopped because I wasn't sure if it was compulsory.
 
Get professional advice.

Being an employee of your own company is not always the best way to distribute profit. You may be better of paying yourself a dividend.This means you would not have to pay super, delay paying PAYGW/tax in the first year, minimise payroll tax and reduce your workers comp bill.
 
Thanks mro, I will look into that. My workers comp bill isn't that bad anyway because I have my self and 2 apprentices in the policy so I get a rebate for the 2 apprentices which brings the premium down a lot. I am actually on workers comp at the moment.
 
Brian, last time I checked, every worker on a site is covered by an award or enterprise agreement. If you work on site, (I am assuming someone must be the tradesman teaching the apprentices), then you too, must be paid under the award. If you don't pay yourself under the award, then you are in breach. The award/eba will require that you either contribute super into CBUS (or other nominated fund/fund of choice).
 
Thanks Peter jrc and Paul. My company is Pty Ltd and I am an employee of the company so I'm guessing I will have to start paying the super again. I used to pay it every quarter but recently stopped because I wasn't sure if it was compulsory.

This is very common. A good rule for business is pay yourself first. Perhaps a sign your tax adviser isn't advising well.?
 
"Superannuation in Australia is a Ponzi scheme"

100% incorrect. Unfortunate that in these days of growing financial literacy that such a comment is made. ASICs website also has a very good deal of information. http://www.financialliteracy.gov.au/ I explains the strategy to educate those who are misinformed or uneducated in financial matters.

The accounting process for all super funds provides a member account which is individual and it rises with contributions and income and reduces for expenses, fees, insurances. Other than present members income being reduced by this cost the existing member funds are 100% invested and the member has choice over the type of investment strategy ie cash, growth etc.

Unlike a ponzi scheme all members could submit applications for withdrawal and the assets sold and all members paid. In theory the value on their statement subject to daily fluctuations. Very few schemes are unfunded. The most notable is the Commonwealth Public Service fund...That what the future fund is set aside for. To address that shortfall.

There are some elements of industry funds which display the character of so called Ponzi schemes. ie : Using existing money to fund new entrants. They use existing fund money to advertise for new members. Trade unions benefit from the higher funds under management as fees are often tiered to total funds under mgt. The members co-operatively allow 50% of the trustees to be union appointed so the system is self-perpetuating. Of greater concern can be that the remaining 50% of trustees are so called member appointed but are also often union supported..ie union delegates / members etc. The present Govt attempts to reform the system and require 1/3rd of trustees to be independent are a great idea to address this issue. Some funds have voluntarily implemented this change already.

Notice how ads for "compare the pair" stopped when ALP lost election? Those ads were comparing the old system long prohibited where adviser fees could be paid. Those ads were withdrawn as they assumed projections 20+ years into the future for a practice that was now prohibited...outrageous.
 
Thanks Peter jrc and Paul. My company is Pty Ltd and I am an employee of the company so I'm guessing I will have to start paying the super again. I used to pay it every quarter but recently stopped because I wasn't sure if it was compulsory.

As an employer you should know that, or should have taken advice before stopping the payments.

The repercussions can be quite severe for not paying superannuation to employees, even if the employee is yourself. As Paul, noted, directors can be personally liable for non payment of super.
 
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