Superannuation: Will 2016 be the year you pay yourself first?

Sylvia Pennington

Rent, wages, lease payments, marketing expenditure…and superannuation contributions?

If you’re like thousands of other Aussie entrepreneurs and small business owners, the last item probably looms low on your long list of financial priorities.

While legislation compels you to deposit the superannuation guarantee amount of 9.5 per cent of salary into employees’ super accounts, there’s a good chance you don’t put a cent into your own, from one year to the next.

According to Association of Superannuation Funds of Australia research from March 2014 on the level and distribution of retirement savings, 48.5 per cent of self employed Aussies had less than $40K in super and 22.6 per cent had none at all.

A considerable proportion of folk in this boat don’t own businesses with any material goodwill or value, other than their labour, either.

All good financial planning involves spreading your risks and an investment in super will represent at least a small diversification from the large part of your finances tied up in your small business.

Although your primary focus may be ploughing every available dollar back into the venture that could one day become your retirement nest egg, it can make sound financial sense to squirrel something away in superannuation too.

With the 2016 financial year just beginning, is now an opportune time to start saving for yourself first, not last?

The answer should be a resounding ‘Yes’ according to MLC planner Michael Miller.

“All good financial planning involves spreading your risks and an investment in super will represent at least a small diversification from the large part of your finances tied up in your small business,” Miller says.

“Even if it’s a small amount, it gets something in place that can then be increased further when business is good. It’s a good idea to set up a regular BPay or direct debit contribution to your account so it goes automatically every fortnight, month or quarter.”

Although it’s tough when times are tight or cash flow has slowed to a trickle, resolve to treat yourself as you treat your staff and keep putting regular payments into the pot.

If your profit or drawings from your business top $37K in a financial year then you can expect a drop in your tax bill, as well as a boost in your super balance. Concessional contributions to super are taxed at just 15 per cent, compared with income tax at 34.5 per cent, including the Medicare levy.

Company directors who’ve make consistent contributions to their own super fund over a period of time may find these deposits escape the liquidator, should the business go belly-up down the track, financial adviser Dr Steve Enticott adds.

Although it’s tough when times are tight or cash flow has slowed to a trickle, resolve to treat yourself as you treat your staff and keep putting regular payments into the pot, he says.

Sylvia Pennington

Sylvia Pennington is a Brisbane-based freelance journalist who writes about small business, information technology and personal finance.

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