Businesses need to act urgently if they are to get the most of current superannuation concessional contribution caps before July.
With Wayne Swan’s Budget reducing concessional contribution caps for the over-50s from the start of the new financial year, many small business owners are losing the chance to top up their super and secure a better retirement.
The new rules mean the over 50s with less than $500,000 in super can no longer add up to $50,000 in additional contributions. From July 1, the limit will be reduced to $25,000 – the same figure as Australians under-50 can contribute.
Of course there is still have time to take advantage of the higher pre-Budget limit, if they happen to have the cash flow to do so. But for some smaller businesses, that just isn’t possible.
"We are seeing business owners who have the cash flow and putting the extra dollars in to maximise the tax concessions and get the 15 per cent tax rate on super contributions if they earn over $300,000 a year," Andrew Allen, Head of Operations at Fifo Capital.
"But for other businesses that are still waiting on invoices to be paid, the cash flow just isn’t there to put extra money into super by the June 30 deadline."
Even though June 30 is rapidly approaching, there are still some actions businesses can take right now to make sure they are looking at all the angles...
Check your contributions
It’s surprisingly easy for contributions to get close to the cap - even if the cap is $50,000 - when you are making extra payments into your super. So check with your fund to find out exactly where you are or you could face sizeable tax penalties if you rush to meet the June 30 deadline but don’t realise you are near the limit anyway.
While there is a rule that says you can get $10,000 back of any overpaid contributions, it’s a process that you probably want to avoid.
Explore ways to get your cashflow flowing
If poor cash flow in your business is standing in the way of you maximising the superannuation top-up opportunity before July 1, there are ways to get it flowing in time.
Fifo Capital, for example, is an invoice finance facility that helps business owners free up money.
"How we work is purely transactional in nature," Allen explains.
"Business owners can potentially access funds locked up in their receivables ledger and due to be paid in July. Basically we 'buy' the invoices and release money to the business when it is needed rather than when the invoice gets paid by the customer."
Talk to a financial adviser
With the rules around superannuation changing each time there is a Budget, it’s important to get expert input on how you can best pick your way through them and get to that comfortable retirement.
"Superannuation is very complex," Allen said.
"Anyone over 50 needs to urgently find professional advice of a financial planner or their accountant so they fully understand the changes to the concessions."