Small business super contributions
For all small business owners, one of the best pieces of advice that we can provide as your small business accountant is to maximise your annual superannuation contributions. The benefits include potentially saving on your annual income tax obligations by creating extra income tax deductions for your business as well as the primary long term benefit of actually being able to provide for your own retirement, rather than having to rely on a Government pension when it comes time to sell up and retire. Of course, there are always exceptions, and for those who have large debts or poor cash flow it may not be prudent to maximise your superannuation contributions and then watch your business suffer in the short to medium term.
There are various limits on how much you are allowed to contribute to your nominated superannuation fund depending on your age and size of your superannuation fund and I won't list them all here in this blog, but will advise that you seek out the right advice to ensure that you do not exceed your maximum limits.
Exceeding your annual deductible limit will see you lumped with an extra tax bill equivalent to 31.5% of the disallowed contribution. You will be allowed to pay this extra tax out of your superannuation fund, but doing so just negates the effort and purpose behind the original contribution, and you can actually end up paying more overall income tax, depending on your personal situation.
So the lesson here is to discuss the matter with your small business accountant and/or financial planner to make sure that you maximise your retirement without jeopardising your businesses viability or contravening current income tax laws.