Home' Border Enterprise : Winter-Spring 2010 Contents 20 enterprise
YOU MIGHT NOT BE IF, LIKE ONE
THIRD OF THE SELF-EMPLOYED YOU
HAVE INSUFFICIENT SUPER, WRITES
MANY Australians think
about working for
themselves and for
those who take the leap
it can mean enjoying healthy profits, flexible
work hours and an enormous sense of
reward that you're living the dream.
But the downside can come when you hang
up your workboots.
According to a recent report by the
Association of Superannuation Funds of
Australia, one-third of self-employed workers
have little or no superannuation.
Part of the problem is that when you work
for yourself you don't get the benefit of
And many small business owners would
rather reinvest in their business than set
money aside for retirement.
In fact self-employed people tend to
bypass super altogether, planning to use the
proceeds from the sale of their business to
The key issue is that small businesses can
be very difficult to sell.
If the owner of the venture is central to
its success, chances are the value --- and
saleability --- of the business can be far less
than you realise.
If the industry in which your business
operates falls into a hole just when you go to
sell, you could be forced to work for longer or
accept a much lower asking price.
Either way, your retirement could start to
look a lot less rosy.
That's why tipping money into super makes
a lot of sense if you run your own show --- it's
a tax-friendly form of diversifying.
Along with building up a separate pool
of investments, super provides useful
tax concessions both while you're in the
accumulation stage and also later on when
you go to cash in your nest egg.
To begin with, your business may be able to
claim a tax deduction for contributions to super.
Pre-tax super contributions worth up to
$25,000 can be claimed on tax each year,
a figure that rises to $50,000 if you're aged
When you turn 60, withdrawals from your
super fund are tax free.
By contrast, the sale of your business could
be quite a complicated transaction and,
depending on the way it is structured, it's
unlikely the purchase proceeds will end up
being completely untaxed.
After years of hard yakka, the last thing
you need is to find yourself short-changed
Paul Clitheroe is a founding director of
financial planning firm ipac, chairman of the
Australian Government Financial Literacy Board
and chief commentator for Money magazine.
Links Archive Enterprise Spring-Summer 2009 Spring Summer 2010-2011 Navigation Previous Page Next Page