As a business owner, it’s likely you have spent many years building a solid business, but perhaps you have shown less discipline when it comes to paying yourself a regular salary, contributing to super and investing for your future. If you are considering building personal wealth for your life beyond business ownership, we can help.
Three tips for business owners to build personal wealth.
- Personal prosperity needs to be planned
- Manage your personal finances as you would your business finances: There’s no doubt you focus on achieving efficiencies in your business, and use accurate financial information to make important business decisions and take up opportunities. You don’t rely on your ‘best guess’ for your business and nor should you for your personal financial future. It’s important to implement the same level of discipline for budgeting, cashflow planning, risk management and asset management and protection when planning for your own financial security.
- Pay yourself: You need to proactively build wealth and quality assets through your business then extract that wealth to sustain your long-term future. At the very least, you need to pay yourself a regular salary and contribute to super.
- Set a strategy for exiting your business: A well planned business succession plan will not only address the financial performance of your business to maximise the sale price for you, it’s also a mechanism for implementing the most effective structure for achieving tax efficiencies, effectively and smoothly transitioning ownership of the business and distributing wealth as you wish.
- Build your wealth through asset accumulation
Accumulating assets during your business life can make a huge difference when preparing for retirement. It’s important to consider the big picture when building an asset portfolio by:
- Optimising the performance of your assets – An asset portfolio that is right for you needs to consider appropriate ownership, tax efficiencies through debt management strategies, and opportunity to use assets as security for loans.
- Structuring assets – There can be significant tax and financial consequences associated with moving assets, so it’s vital to set up the ownership of assets so they align with your overall financial goals.
- Managing asset risk – There are many financial options and choices associated with asset ownership and it’s important to structure your affairs in a manner that protects your assets in the event of unforeseen business circumstances or legal challenges.
- Take advantage of super
At Robinson Voss Partners we consider superannuation an integral part of achieving personal prosperity. We can help you make the most of your super by:
- Utilising your superannuation annual concessional caps: Superannuation is a tax-effective way to build your retirement savings, but annual contribution caps mean it’s important to start contributing early and build your super balance.
- Carry-forward super contributions: New rules in place from 1 July 2019 enable super fund members to ‘catch-up’ unused concessional contributions limits. That is, you can contribute the difference between earlier annual contribution amounts and the $25,000 per annum cap over a five year period.
- Applying the bring-forward rule: The bring-forward rule enables people under 65 to contribute three years of non-concessional contributions (up to $300,000) in one year.
- Utilising a SMSF: A SMSF can offer a flexible tax environment and greater control over investment portfolios for business owners (including owning your business premises).
- Small business CGT contributions: Small business owners (with a turnover of less than $2 million) can make super contributions from the sale of their business assets.
There are strict rules and restrictions associated with super and small business CGT caps, so it’s important to seek advice to make the most of your personal situation.
Craig Robinson and Sue Voss are CPA accredited SMSF specialists and registered ASIC SMSF Auditors providing advice and support for trustees.
As business owners ourselves, we understand the challenges of growing a healthy business and building your personal wealth. At Robinson Voss Partners, we have over 40 years combined experience and expertise in specialised tax issues, accounting and business advice.
If you would like to know more about building your personal wealth, transitioning out of your business and planning for life beyond business ownership, I encourage you to give us a call on 03 9708 8801 or email firstname.lastname@example.org
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document but should obtain appropriate professional advice based on their own personal circumstances.