Business owners need to pay themselves super
Source: Money Management
Less than half of female business owners pay themselves superannuation while many business owners in general stopped making super contributions once they transitioned from being an employee to a business owner, according to HLB Mann Judd Sydney.
The firm’s wealth management manager, Lindzi Caputo told a media briefing yesterday that business owners who did not contribute to their super were not growing their super savings as much as they would be if they were making regular contributions or were working for an employer.
“They’ve built up their super balance through SG [superannuation guarantee] from their employer. And then they go into business on their own and all of a sudden they’ve stopped making contributions,” Caputo said.
“But what makes it even worse is that if the earnings of that fund are not enough to cover the fees and insurance premiums of that fund, they might actually be eroding the value of their super fund.”
Only 45 per cent of female business owners paid themselves super, with the result that self-employed women’s super balances were on average one-third lower than both women employees and self-employed men.
“Anecdotally, female business owners often tell us that they are not expecting to make a profit or take a salary for the first few years – but at the same time they don’t have a plan of how to get to the stage where they will,” Caputo said.
Caputo said business owners and women in particular should understand the importance of building wealth for their future that was separate from their business, which she said would be a slow and steady process.
She said business owners must keep business and personal finances separate and avoid paying for business expenses from a personal account and vice versa.
“Think professionally and set things up properly at the beginning. Establish a separate bank account for the business, and a credit card used solely for business purposes,” Caputo said.