Small business accounting tips for managing your cash flow
Developing good cash flow management habits is crucial to the success of any business – whether it’s a start-up, established small business or big business.
30th June 2021
When you are operating as a sole trader business, you are not only ensuring it is successful, but you’re also in charge of making sure you are well looked after in retirement.
If you haven’t been giving your superannuation as much attention as it deserves, you may find yourself short of having the funds to retire comfortably.
One of the biggest mistakes small business operators, particularly sole traders, make is not treating themselves as employees entitled to the same benefits they would be if they were working for someone else. Thankfully, it’s never too late to start thinking about the future.
Here are the top reasons why contributing to your superannuation account makes good business sense:
As a sole trader business you’re not legally obliged to contribute to your superannuation. However, if you aren’t thinking about the future you want now, achieving your business and personal financial goals isn’t going to be easy. So, while the option is yours as a sole trader, contributing regularly to your superannuation is highly recommended if you want to keep up with your cost of living when retired.
According to the Association of Superannuation Funds of Australia (ASFA’s) Retirement Standard, single people will need an average annual budget of $43,601 per year to live comfortably in retirement, where couples will need $61,522 in annual retirement savings.
With so many things to think about when you are starting your own business, thinking about your superannuation doesn’t always take precedence. But with the high cost of retirement living, it’s important to set time aside to get your superannuation straight as part of your business plan. Talking to your accountant or financial advisor to get the guidance and business support you need to get your superannuation contributions in order, could be the difference between a happy retirement or otherwise.
If you find it hard to save, or you’ve been investing the profits of your small business back into supporting your business growth, you may not have much of a superannuation nest egg to sing about.
However, in Australia there are incentives associated with contributing to your superannuation fund. When it comes to filing your business tax return, superannuation payments can be a tax effective way to save for your future compared to simply putting the same funds into a business savings account.
Subject to certain contributions caps, your contributions may only incur the concessional contribution tax rate of 15%. This is often significantly lower than your normal small business tax rate. As well as being taxed at a lower rate, your super contributions will be stored away until your retirement, helping you save while you are still working.
As a sole trader business you may also be eligible for small business government assistance and incentives. If you are a low-to-middle income earner you may still be eligible for the super co-contribution payment scheme. This basically means that if you earn under a certain threshold and make after-tax contributions to your superannuation, the Government will also make a contribution up to a maximum value of $500. For example, if you earn $44,564 and you contribute $600 in the FY21 tax year, you can receive a $300 in co-contribution into your super fund from the Government after you lodge your tax return. This could be a significant incentive when you factor in that this might be available to you every year.
Contact us to find out more about how BOQ Business can support your small business.
This blog post is for general information purposes only and is not intended as financial, taxation or professional advice. It has not been prepared with reference to the financial circumstances of any particular person or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article.
Credit provided by Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian Credit Licence no. 244616 (BOQ). Conditions, criteria and fees apply. BOQ's standard credit assessment criteria apply. This website contains general advice, which has been prepared without taking account of your objectives, financial situation or needs. You should consider the appropriateness of any advice before acting on it. You should obtain and read the relevant T&Cs and Guide to Fees and Charges that apply to this product before making any decision about whether to acquire or continue to hold it, available at your local BOQ branch or at boq.com.au.
Acceptance of any application for credit is always at BOQ's lending discretion.
Information current as at 07 July 2023.
For more information about Federal, State and Territory Government financial support measures available to Australian businesses, download our comprehensive summary here. You can also stay up-to-date with new announcements via the Australian Government's support for business page found here, or for State and Territory-specific information, click here.