Small business planning for retirement: securing your financial future

As a small business owner or sole trader, planning for retirement requires a proactive approach beyond compulsory superannuation contributions.

Unlike employees covered by the superannuation guarantee, you have the flexibility to manage your retirement savings strategically.

Voluntary contributions to superannuation are an advantage for small business

If you’re a sole trader or taking drawings from your business instead of a regular wage, you have the option to contribute to superannuation voluntarily. Whilst this can be beneficial for you to control your own cash flow for your stage in life, the fact that you don’t have compulsory superannuation contributions means you need to take greater control and discipline to your long term goal planning. Superannuation offers tax benefits not just on contributions but also on investment income and growth, making it a powerful tool for wealth accumulation.

Beyond business sale: diversifying retirement funding

Many small businesses lack significant saleable value, making reliance on a business sale for retirement funding risky. The process of selling a business can be complex and uncertain, underscoring the importance of diversified retirement planning.

By starting early and making regular contributions to superannuation or other assets such as the premises your business operates from, you can mitigate the risks associated with relying solely on your business.

Income splitting strategy

A practical tactic for small business owners is income splitting between spouses. When both partners are actively involved in the business, distributing income can optimise tax benefits by utilising lower marginal tax brackets. This strategy not only reduces overall tax liability but also enhances retirement savings through structured contributions to both superannuation funds.

Planning for retirement: maximising super contributions

For small business owners with a stable income stream, maximising super contributions is a smart course of action. This is especially true if you are both already drawing a reasonable wage, of at least $45,000 per annum each.

By contributing extra to superannuation above the superannuation guarantee of 11.5%, you can:

• significantly lower income tax,
• allow for greater investment in retirement savings within a tax-efficient framework, and
• ensure that every dollar saved contributes towards a financially secure retirement.

Small business retirement planning: prepare today for a secure tomorrow

Small business owners face unique challenges when preparing for retirement, but strategic financial planning can turn these challenges into opportunities. By taking proactive steps such as voluntary super contributions, income splitting, and diversifying retirement investments, you can build a robust financial foundation for your future.

Small business planning for retirement: securing your financial future

At Precision Wealth Management, we specialise in tailored financial planning strategies for small business owners. Whether you’re looking to optimise your super contributions, explore income-splitting options, or develop comprehensive retirement plan advice, our experts are here to help. Contact us today to schedule a consultation and take the first step towards securing your retirement dreams.

DISCLAIMER – The information provided in this blog is general and does not consider your individual financial needs or objectives. It does not constitute personal advice. We recommend seeking out professional and independent financial, legal and tax advice which has been designed for your individual situation before acting on any information contained below.