Small Business Superannuation – Are You Neglecting Your Super?

Self-employed people sometimes fall into the trap of not having much super saved for retirement because they miss out on superannuation contributions paid by an employer that regularly pays on their behalf.

A study performed in 2008 by the Australian Super Funds Association (ASFA) discovered that 25% of Australians who are self-employed did not have any superannuation at all.

Selling your business doesn’t guarantee retirement money

Selling a business in order to raise money for retirement is not always an easy task. Your business may not be worth as much as you think when you are no longer involved in the day to day management. Some business types are more difficult to sell than others which means relying on the sale price of your business to fund your lack of super contributions is risky.

 

Start a dedicated superannuation account instead

It is better to consider creating a separate retirement savings fund. If certain criteria is met, you may also be eligible to receive the government super co-contribution if your income is in a lower bracket (as often is the case with small business owners).

Contributing to superannuation helps you lower your tax as a business owner

Saving for retirement can be achieved in many ways but a small business superannuation account is a tax effective method. If you are seeking to lower the tax on your current income, making additional super contributions can help.

A tax deduction of up to $25,000 a year may be available for contributions made by you or your business to your superannuation fund (or if you are over 50 years old, $50,000 a year until 2012). This may assist to keep your tax payable amount lower today while increasing your assets for retirement.

Contributions need to be made before 30 June in order for them to be tax deductible, however, keep in mind that there are penalties if the contribution caps are exceeded.