A looming retirement crisis may be on the horizon for many Australians, particularly small business owners, who appear to be overlooking their superannuation contributions. Recent research by AMP Bank indicates that only 55 per cent of small business operators—most of whom manage businesses with four employees or fewer—make regular contributions to their super. This signifies that nearly half of these owners are forgoing super payments, often prioritising business reinvestment and cash flow management instead.
In stark contrast, around 90 per cent of the wider Australian workforce receives guaranteed superannuation contributions, which have recently been increased to 12 per cent. However, superannuation is not mandatory for the self-employed, a group that constitutes the majority of Australian business owners. This lack of contribution among small business owners is contributing to an increasing retirement savings gap.
AMP’s projections reveal that even a modest contribution of $100 per week towards superannuation, assuming an annual return of 6 per cent, could accumulate to over $500,000 by the age of 65. John Arnott, director of AMP Bank GO, acknowledges the challenges faced by small business owners, who often allocate funds towards business needs rather than personal retirement savings. He notes that the early stages of running a business are particularly tight financially, making it difficult to commit to super contributions.
Arnott encourages business owners to find a balance between short-term operational needs and their long-term retirement plans. He suggests utilising available resources to ease the administrative burden associated with super contributions. Tools such as the Australian Taxation Office’s website and banking apps can streamline the payment process, offering insights into cash flow and enhancing financial control.
It is crucial for small business owners to understand the advantages of the superannuation system, which provides significant tax benefits for long-term investment. Even minor, consistent contributions can yield substantial growth over time through compounding.
In summary, the lack of regular superannuation contributions among Australia’s small business owners poses a serious risk to their financial security in retirement. It is imperative that these entrepreneurs consider the long-term impact of their financial choices and take proactive steps to build their superannuation, ensuring a more secure retirement.