MY husband and I have been too busy running our small business to build up enough super to fund our retirement. How can we remedy this situation quickly?

Unlike employees, self-employed people are not forced to join a super fund and compelled to make contributions. As a result, many find themselves in your situation with too little super. Fortunately, the rules allow self-employed and other people not supported by employer super contributions to fast-track their super later in life.

Can you be more specific?

Certainly. The aged-based limits on the maximum tax deductible super contributions allow an annual tax deduction of up to $100,587 (indexed annually) on reaching age 50. Both of you could theoretically claim a tax deduction of this amount, over $200,000 in total, for putting money into super.

You have to be kidding. Where can we get that sort of money? And my accountant has said that we can't claim a deduction for all the money we put into super.

That's why it pays to start making super contributions as soon as possible. The more you put in when you are in your 40s, the less pressure there will be later on. Your accountant is also correct. The tax deduction under Section 82 AAT for the self-employed and other unsupported people is $5000 plus 75 per cent of the excess above this amount subject to the aged-based cap of $100,587. To claim the maximum tax deduction this year requires making a super contribution of $132,540.

This is clearly beyond our means. What else do you have to suggest?

You need to think smarter. For example, you should attempt to manage your tax affairs to keep your personal tax bills to a minimum. By reducing your taxable income down to $21,600 a year, you can keep your tax rate down to 16.5 per cent and the money going into super is subject to only 15 per cent tax.

But we need money to live on. How do we survive in the meantime?

One way to fund the super contributions - particularly close to retirement - is to sell assets including shares and investment properties owned in personal names and deposit the proceeds in a super fund. You can still claim the Section 82 AAT tax deduction for this even though the super has not been funded out of business income.

Are you sure about this? My husband has just inherited $150,000 from his mother. Are you saying that we can claim a tax deduction for putting this money into our superannuation fund?

Yes. Because you both receive less than 10 per cent of your assessable income from a source paying you super, you are eligible for the Section 82 AAT tax deduction.

Is this tax deduction still available when we sell our business?

Yes. Provided you are aged less than 65, you don't need to be working to claim the super tax deduction. This allows you to build up your super after retirement if you have the money.

Is there any way to claim a full tax deduction for our super contributions?

Yes, if you are prepared to operate your business as a private company. You can then pay yourselves a wage and employer super which is fully tax deductible to the company and not subject to tax in your hands. If your business is profitable, it could be worth the cost of establishing a company and paying the extra accounting costs involved. These would be in the order of $2000 a year.

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