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Planning for Retirement as a Business Owner

Many business owners believe that their business IS their retirement and imagine that the proceeds from it’s sale will fund their life after work. As a result they often do not focus on tax planning, investing separately in Superannuation or other investments such as Property.

It is a common problem, as many business owners believe they are building a valuable asset and that they will live off the proceeds of the sale. This might work, particularly with the right advice, however business owners still risk their future by putting all their eggs in one basket.

Business owners should increase their chances of a comfortable retirement by following some basic rules:

    1. Start contributing to a Super Fund – Superannuation is the last tax haven and we all know that the less tax we pay the easier it is to create wealth. Earnings on investments with Super are taxed at 15%. How does that compare to your marginal tax rate? Make sure you are investing within the right tax structure.
    2. Stop paying rent to somebody else – Self-Managed Super Funds work really well for business owners because you can use your Super to buy your offices or factory and then rent the premises from the Super Fund. You can borrow from your own Super Fund and it may add greatly to your business value when you come to sell.
    3. Protect your assets from creditors – Another advantage of Super is that so long as you make regular contributions, the contents are protected from bankruptcy. This can be a very attractive aspect of Super if your other assets are exposed to creditors.
    4. Maximise your opportunities as you near retirement – Once you get to age 55 you can use strategies to turn your Super Fund into a near zero tax environment! You can still contribute to the Fund and claim deductions for your contributions. You will need to draw down a Transitional Pension, but this can always be contributed back to the Fund. This means that any asset (such as property) sold after this time can potentially pay NO capital gains tax!tax planning
    5. Consider the small business capital gains tax concessions – if you plan to sell your business to fund your retirement you may be able to minimise (or reduce to zero) any capital gains tax on the sale of your business if you contribute the proceeds into super.
    6. Plan your retirement in advance – With caps on contributions you are able to make to Superannuation and many other issues to consider, the earlier you start planning your retirement the easier it will be. Start by reviewing your existing Super Fund and make sure it is working as hard for you as possible.
    7. Surround yourself with people who can provide you with the right advice to get you to where you want to go.

If you would like advice on how to plan your retirement effectively, we can help. Get in touch here.

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