Business Owners and SMSF Super Contributions
I was cleaning up my office at home over the Holiday period and came across some old “Money” magazines. Picking up one that had a special feature on superannuation and business owners from October 2002, I flicked through the articles and was interested to see how much things had changed and how much has stayed the same.
One of the articles that struck me was entitled “Going it Alone” – it stated that “the Australian Bureau of Statistics tells us that only about 20% of small business people are contributing to super.” Back in 2002, if you were self-employed (as a sole trader or in partnership) the maximum full tax deduction for superannuation contributions was $3000 (increased to $5000 during that year). Now we are able to make tax deductible contributions up to the contributions caps limits – for those under 50 year of age $25,000 and $35,000 for those over 50 for the 2015 financial year.
It would be interesting to see if this change and the other changes to superannuation over the past nine years have changed this percentage of the those small business owners who make super contributions. My feeling is that it would have increased but not by much, I would be interested to hear your thoughts.
The article detailed that the main reasons that small business owners did make superannuation contributions was that they used available funds to put back into their business, building the business over time and hopefully having a saleable asset to use for their retirement. The capital gains tax concessions continue to support and encourage this in practice.
A few things have not changed since 2002, firstly the need for small business owners to consider super contributions as a critical part of their financial planning. If the business does not build sufficiently it is important that other assets within super have been accumulated for retirement. Secondly, if the small business owner has made reasonable superannuation contributions to themselves these are protected from bankruptcy if in the worst case scenario, the business fails.
A SMSF can be a valuable wealth creation vehicle for the small business and the sooner that you make super contributions the better, let compounding interest work in your favour.
If you would like more information or would like to talk to a SMSF Specialist Advisor do not hesitate to contact us.