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A ‘how to’ for business owners managing their super

As a small business owner, you’re probably used to putting everyone – and everything – ahead of yourself. And that’s generally seen as something to be praised! But it’s also a trait that needs to change when it comes to retirement planning.

Even if hanging up your boots is decades away, it’s never too early to start putting money aside for the future. Here are some strategies to help you resist the urge to plunge all your earnings back into your enterprise and, instead, start investing in your super.

Get real

Small business owners have significantly less in their super funds than salaried workers, according to Kate Carnell, the Small Business Ombudsman. For the 45% of businesses in Australia owned by women, this can present particular challenges as they are less likely to grow their businesses, preferring to keep them small and sustainable – meaning no huge sale windfalls later in life.

Planning is the key. Carnell says putting money aside in super, even if it’s only $20 a week, can create a considerable nest egg over time. Have a look at some planning tips to see how much you’ll need for retirement.

Take advantage of tax breaks

‘Tax break’ is music to a small business owner’s ears – and did you know that paying yourself super is a tax deduction?

That’s right, you can contribute up to $25,000 each year in concessional super contributions (i.e. where you can claim it as a deduction), and an additional $100,000 a year in non-concessional super contributions (i.e. money you’ve already paid tax on).

Get the government to pay it for you

Even better than a tax break is free money! For those earning less than $37,697 per year (this amount can change, so check the ATO website) you may be eligible for a super contribution of up to $500 from the federal government.

The co-contribution cut off extends up to $52,697 on a scaled-down basis, so be sure to talk to your accountant or check a government site like MoneySmart to see what you’re eligible for.

It’s good business

Accountants talk about ‘lifestyle creep’ – that’s when small business owners don’t have firm planning and salaries, they pocket the profits each month and become accustomed to the good months without planning for the future.

Set yourself a remuneration package to avoid overdoing it or, conversely, putting everything you make back into your enterprise. Having a structured salary will also help you better qualify for things such as mortgages and car loans.

Small business super checklist

  • Shop around and find the best super fund for your needs, and beware of fees.
  • Pay your super when you pay your employees.
  • Don’t worry about starting with small contributions.
  • Make sure you take advantage of all available tax breaks and government co-contributions.
  • Set yourself a remuneration package as you would regular employees.

Have you considered what else you need to plan for? Talk to Prospa on 1300 882 867 or apply online for a small business loan to set yourself up for success.

The information in this post is provided for general information only and does not take into account your personal situation. Nothing contained in this post constitutes advice or an endorsement or recommendation of any kind by Prospa. Any links to third party websites are strictly for informational purposes only. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from financial, legal and taxation advisors. Although every effort has been made to verify the accuracy of the information as at the date of publication, Prospa, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy, or omission from the information for any reason, including due to the passage of time, or any loss or damage suffered by any person directly or indirectly through relying on this information.