Has there ever been a better time to become an entrepreneur?
When our parents were our age, kick-starting was something you did to a motorbike and tweeting was strictly for the birds. Now, the advent of crowdfunding and social media has led to the creation of more marketing and financial opportunities than ever before. Building your own website is not the specialist task it once was in the 1980’s – now you can learn to code online for free, or you can simply use a website builder program. When the news isn’t mocking millennials for their love of smashed avocado, they’re eagerly covering their entrepreneurial success stories. So, if you’ve decided that 2018 is the year you’ll start working for yourself, your friends and family shouldn’t be that surprised.
However, there is side to young entrepreneurship that the public rarely glimpses. The media gets caught up with the glamourous ‘Insta-famous’ side of young business, and all the while, one significant aspect stays out of the spotlight.
That significant aspect is none other than: Superannuation.
Admittedly, choosing the right superannuation fund for your business and employees lacks that racy, ‘Wolf of Wall Street’ feel. No one asks Elon Musk questions about super – we’d much rather know how that human colony on Mars is shaping up instead! Nevertheless, if you are an entrepreneur, you are going to need to know about superannuation funds, and how to select one that best suits your business and employees.
Don’t Believe Me? Here Are the Cold, Hard Facts.
Super can seem as though it is only relevant to retirees. The reality is that super affects you now, and far more than you might think. There are approximately 1.7 million self-employed Australians and 75% of these budding entrepreneurs are not currently contributing to their own super. Already, the Financial Services Council is seeing self-employed people retiring with significantly less to live on in retirement. If this is your first business venture and you are still gaining experience, it’s possible that your company could end up failing (don’t beat yourself up too much, that’s all part of the learning process!). If this does happen, super can help. Dr Steve Enticott, financial advisor, points out that if your company does go under, your consistent contributions to a super fund may escape liquidation. Superannuation needs to be something you factor into your business plans from Day One, or else you could end up with some big regrets down the line.
The Best Fund for Your Industry
The nature of your business is going to play a role in choosing the best superannuation fund. Are you operating with a staff of four, or forty? What are your projected earnings? Are you operating out of the traditional shop-front, or are you part of the ecommerce sector? The super fund that works for your friend’s start-up may not be right for yours, so don’t skip the leg work. Do your own research or speak to a financial advisor to find out what will be the most beneficial for your business.
If you’re the head honcho, you are going to be making superannuation payments for your employees. Usually, if you are paying your employees $450 or more before tax per calendar month, you are required to pay them super as well. The minimum amount you must pay is known as the super guarantee (SG). You must pay this SG at least four times a year, and the current SG amount is 9.5% of your employee’s ordinary time earnings. Many of your employees will be entitled to their choice of super fund, but you’ll need to elect a default super fund. Their superannuation will go into this fund if they don’t choose a fund, or if they haven’t provided you with the necessary information by the super payment date. Pick a fund that has transparent, competitive fees, offers a variety of investment options, and allows your employees to diversify their portfolio. You’ll be on your way to becoming the world’s best boss!
You may not typically associate entrepreneurship with choosing the right superannuation fund. Nonetheless, it is a crucial component of starting your own business. Without thorough research and careful consideration, you and your employees could miss out on gaining significant funds, or you could even cop a penalty charge from the ATO. Whether this is the year you finally start flying solo, or whether you have been an entrepreneur for some time – you won’t regret taking the time to choose the best fund for you.
*The information in this article is of a general nature only. It does not take into account your financial objectives, situation or needs. You should consider whether it is appropriate to your individual circumstances. Before you make any investment decisions, we suggest you obtain or seek licenced financial advice.