5 Things Small Business Owners Should Know About Super

Hey, small business owner, have you been paying your super? It’s become common knowledge that small business owners are notorious for investing more into their business than into their own superannuation funds. This is generally because, by law, it’s not mandatory for sole traders and those in partnerships to contribute to a super, and it’s easier to justify spending money on the business than it is to put money away for retirement, which can feel so far off. 

When you’re caught up in the daily demands of the business, it’s easy to forget to prioritise paying into your super, but there are so many benefits that small business owners miss out on by doing this. In this article, we’ll provide five compelling reasons why you should be taking advantage of paying super. 

1. Bigger tax deductions 

Tax isn’t something that any business owner looks forward to, so if there’s a way to minimise what you’re paying, wouldn’t you do it? When it comes to your super contributions, there are two: concessional and non-concessional. 

Non-concessional contributions do not offer any immediate tax benefits, with concessional contributions, on the other hand, you will receive a tax deduction with a cap of $30,000 per annum. Furthermore, if you haven’t used your cap in previous years, you will be presented with the opportunity of what is called the carry-forward of unused concessional contributions. In other words, your concessional contributions carry forward, and you will be allowed to contribute more than $30,000 lending to a greater tax reduction. 

2. Government top-ups and tax offsets

The Australian Government has implemented a super co-contribution initiative. The aim of the initiative is to aid low and middle-income earners the ability to boost their superannuation to help them achieve financial stability in retirement. 

Those with an income of less than $60,400 (before tax) and who meet the eligibility criteria will be eligible to receive 50 cents for every $1 added to super. In addition to this, you will also be entitled to a tax offset of up to $540 if you contribute towards your spouse’s super, granted they don’t earn an income or their earning are less than $40,000 per annum. 

3. Insurance cover

Your super isn’t just a way to build towards your retirement, but it’s also a vehicle in which to obtain and hold personal insurance coverage in a tax-effective way. Some types of insurance that can be held inside your super include: 

• Life insurance - a great insurance to start off with, holding life insurance means your family will be paid a lump sum should you fall terminally ill or pass away
• Income protection insurance - otherwise known as salary continuance cover, this insurance can pay up to 75% of your income (pre-tax) for a set period should you be unable to work. However, you need to be well versed on the conditions of this type of insurance
• Total and Permanent Disability (TPD) insurance - TPD insurance, while it has its restrictions when held inside a super, pays you a lump sum should you be permanently or totally disabled

4. Leveraging compound interest

Every money-savvy business person knows the power of compound interest, and that contributing towards your super you’re doing a good job at leveraging compound interest. 

Compound interest works by calculating the interest on both your initial principal amount as well as the accumulated interest attained. This means that contributing even a small amount will yield substantial results compared to a standard savings account. Every small contribution towards your super has the potential to yield big returns because you won’t be allowed to touch that money until retirement. 

5. You can use your super to buy property

It’s not as simple as saving money in your super and buying an investment property, but there are ways to use your super to invest in property. For business owners with a self-managed super fund (SMSF), you can choose how to invest your accumulated money—which includes buying investment properties! It’s advisable to work with an expert mortgage broker and investment advisors should you pursue this, as it is a highly regulated process.

Final Thoughts

As a small business owner, it’s understandable that you’d prioritise building your business, but in most cases, it’s possible to grow both your business and your super. The Australian Government has provided multiple ways to aid you in building your super, and there are many benefits to doing so. To get more information about how to contribute towards your super, get superannuation advice from a professional advisor so you can maximise your retirement savings and secure a prosperous future. 

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