Posted October 15, 2018
Australia is a fantastic country filled with small business owners, all who go into business because they are really good at something or really passionate about a particular industry, which is a wonderful thing. However, many small business owners, including salon owners, hairdressers, beauty therapists and aestheticians, believe that the sale of their business will fund their retirement and therefore they don’t need to contribute to superannuation while they are working in the business.
This just is not the case.
We understand that as a small business owner, putting extra funds aside each year for your own superannuation can seem like a bit of an indulgence, or simply might not be achievable for you. And depending on the way that your business is set up, whether you are a sole trader, whether you have incorporated your business etc. you may not legally have to contribute to your own superannuation. But what you need to do legally, and what you SHOULD do for your own future are two very different things.
“The dilemma in small business is that you can’t always tell when you’ll be in a position to make a decent contribution,”says Kate Carnell from the Small Business Ombudsmen. “At the moment there is capacity for lump sum contributions but only under a narrow set of circumstances.” Carnell says.
Superannuation is a small contribution that you are making for your future self. If invested correctly, in the right kind of funds and the right investments, it could potentially greatly outperform any potential gains you might get from the sale of your business, all through a minimal contribution each pay cycle. We have all heard of salon owners struggling to sell their business or not getting the price that they wanted or expected, leaving them with a limited amount to retire on. It’s important that you consider the sale of your business (if it occurs) as part of an overall retirement plan – of which superannuation, savings, your family home and any inheritances may also be part of.
While many people are able to sell their businesses successfully, the market is always changing. What you would have paid for an established salon 10 years ago is quite different to what you would pay today, and will be markedly different to what you will pay in the future. It’s important to consider all the possibilities, like not being able to sell your salon at all, when planning for your retirement. HABA advises all our members to seek professional financial advice, not just on your business but on your retirement plans and personal finances in connection with your business, to ensure that you are adequately prepared when it comes time to hang up the wax pot or scissors. It is far better to be prepared than to receive a nasty shock come retirement.
*Note, this blog post should not be considered advice, it is a general statement produced by the Hair and Beauty Association and should not be considered to be specific to your situation. We absolutely recommend that you seek advice from your financial planner about your specific situation before making any major decisions about your superannuation, business or future.
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