SMSFs or self-managed super funds have been on the rise, almost doubling in Australia over the past 10 years. The benefits of having an SMSF have been shown to far outweigh the benefits of NOT having an SMSF, so much so that more Australians are putting their money where their mouth is and investing in their future wealth.
Before one can truly appreciate the benefits of a self-managed super fund, one must first start with the basics.
What is a Self-managed Super Fund?
An SMSF is for people who want more control over their money and their wealth. As awareness and understanding around the importance of future finance planning spreads, Self-Managed Super Funds are gaining increased popularity.
Rather than investing all your superannuation into a super fund managed by large corporations giving you little to no say in how your money is invested – you work with your accountant to establish a self-managed super fund which gives you much more control of your money and wealth building.
An SMSF has a maximum of five people managing it, including you. Together you all get to decide on how you are going to build your wealth through acquiring assets in making sound investments. The bonus is that SMSFs are a lot more cost effective to run!
So then, what are the benefits of SMSFs for Small Business Owners
In the same way that SMFS allow you to grow your wealth and plan for a financially sound future in your personal life, the same concepts are applicable for your business – especially if your business is earning upwards of $250,000 annually.
Here are 3 main benefits:
1. Maximise the value of your business (buying assets)
There is a lot of talk among small business owners that their future retirement fund will be funded in the future sale of their current business – don’t make this mistake.
While the value of your business right now holds great wealth potential for your future, what happens if you can’t find a buyer willing to pay you what you deem your business is worth? Something is only worth what someone is willing to pay for it.
In a worst-case scenario of your business suffering great loss in the next few years and you are forced to close your doors, where will your future wealth come from?
What a lot of small business owners are starting to do is plan for their future now (or any business mishaps they might come across along the way) by investing in assets such as commercial properties – especially if it’s the commercial property your business resides in.
Having a self-managed super fund allows you to purchase such commercial properties with your super fund which in turns increases the value of your super fund and allows you to control the outcome of some of your larger business expenses. What this means is, if the property is owned by your SMSF then legally your SMSF can lease that property back to your business at an agreed upon price.
Owning the property that your business resides in gives you something to fall back on if your business is forced to close AND it also gives you the opportunity to earn more income from your building – dependent on its layout and regulations.
All of this without having to touch your own income! And still the benefits continue…
2. Enjoy tax breaks and benefits
The benefits of self-managed super funds and owning commercial property is amplified by the ability to legally reap the rewards of tax breaks and benefits that come with it.
For one, if you already owned the commercial property BEFORE you established an SMSF, you can transfer the ownership of that property INTO your self-managed super fund with minimal stamp duty fees, saving you a lot of money!
If you are buying the commercial property your business is in, your SMSF can rent the premises to your business and then your business can claim the rent as a business expense.
If you wanted to sell any commercial property that your SMSF had purchased, you would be required to pay little to no capital gains tax adding an incredible amount of additional wealth into your self-managed super fund.
3. Set yourself and your family up for the future
Having a successful business now is an amazing achievement and something to be proud of. Leverage that level of achievement and multiply it by building your wealth now and maximising your wealth for the future. Set yourself and your family up for future wealth success by establishing and building your self-managed super fund portfolio.
Invest now and reap the benefits immediately AND down the track.
If you are considering an SMSF please know that this is not considered official financial advice and that it’s imperative that you speak with a qualified financial advisor or your registered accountant. This information is designed to keep you informed of all the potential earnings your business and a self-managed super fund could be making you. Do your own deeper, more personalised research and speak with relevant professionals should you decide to take that next step.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."
