Failure to contribute may result in super pain

FOR many small business owners, putting money into superannuation is a luxury, placed at the end of the queue of priorities. For many of these business people, however, this situation could become a disaster when it comes time to retire.

“Sadly there is no requirement for a small business owner to make a contribution to superannuation and in many cases business owners prefer to have the flexibility of not having to pay themselves super, unlike the regulations controlling employee super-annuation,” Brett Davies Lawyers partner Brett Davies told Business News.

“In many cases, small business owners are relying on the asset of the business to fund their retirement. But if they die, or if they get divorced or the business folds, they are left with nothing.

“At least with superannuation it is protected from bankruptcy. From my own experience, over 60 per cent of small business owners don’t have any significant superannuation.

“They can be sitting on millions of dollars of assets but only have $20,000 in super-annuation.

“It’s a pack of cards that will fall over as soon as the wind blows.”

The problem of drawing small business owners into superannuation is one that the Financial Planning Association (FPA), among others, is taking very seriously.

FBA public policy senior manager Con Hristodoulidis said that, while there was concern within the super industry, there was no easy solution.

“Small business often needs as much running capital day by day to run their own business, so we might need to look at some kind of incentives, with the obvious one being a tax rebate,” Mr Hristodoulidis said.

“If they are operating on a very small margin they obviously haven’t got the money to put into superannuation and saving for their retirement.”

Association of Superannuation Funds of Australia senior policy adviser Robert Hodge said relying on the assets of a business to fund retirement was unwise since it went against the accepted super principles of diversification in investment.

Mr Davies said that, in many cases, small business owners bought shares or other investment as a form of saving for their retirement, only to sell them when times were tough, leaving them with nothing.

Many small business owners are generally quite independent and don’t want to put money into a super fund, he said. Setting up your own superannuation fund is an alternative but it could cost thousands of dollars in lawyers’ and accountancy fees and ongoing costs.

“I would suggest that most financial advisers would advise you to have at least $200,000 before you consider setting up your own super fund,” Mr Davies said.


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