Date issued: 31 May 2007

The new financial year is the perfect time for the self employed to reconsider their superannuation options or to invest in superannuation for the first time.

From 1 July 2007, self employed individuals will be able to claim a full tax deduction for any contributions made to superannuation. Low income earners will be able to forgo the deduction and instead be eligible for the Government co-contribution.

CPA Australia Superannuation Policy Adviser, Michael Davison, said that prior to 1 July 2007, self employed people can only claim a full tax deduction on the first $5,000 of their contributions each year and on 75 per cent of the balance.

'This may have discouraged many self employed people from contributing more than $5,000, the end result being inadequate retirement savings,' Mr Davison said.

However, from 1 July 2007, individuals will be able to make concessional contributions to superannuation of $50,000 each year. And if you’re 50 or over, you can contribute $100,000 each year until 2012. A self- employed person will be able to contribute up to these limits and claim a full tax deduction.

'Many self employed people see their business as their retirement savings. However, not all businesses succeed, or a buyer may not be found when it comes time to retire.

'It is important for people to diversify their retirement savings. The new rules provide the opportunity for the self employed to maximise their superannuation and not be so reliant on their business.

'Self-employed people with low incomes may also want to consider the Government co-contribution next year.  Someone earning $28,000 or less can contribute up to $1,000 and receive a co-contribution of up to $1,500. This will be more beneficial than claiming a deduction on a similar contribution,' Mr Davison said.

Opportunities also exist before 1 July 2007. A self employed person aged 50 or over can make a deductible contribution of up to $105,113 this financial year. The most that person can contribute concessionally next year will be $100,000. So it may pay to maximise these contributions this year.

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