Retirement Planning for Small Business

If you are a small business owner, you may be wondering how to plan for your retirement. There are several factors to consider, such as when you can access your superannuation, how much tax you will pay on your retirement income, and how to get your business ready to sell if you decide to do so.

One of the main sources of retirement income for most Australians is superannuation. Superannuation is a way of saving for your retirement that is partly funded by contributions from your employer(if you were employed during your working life), and partly by your own contributions, which are tax deductible and can help reduce your yearly tax liability.

You can access your superannuation when you reach your preservation age, which is between 55 and 60 depending on when you were born. However, you may be able to access your superannuation earlier if you experience permanent incapacity, severe financial hardship, or if you are part of an approved early retirement scheme.

The tax treatment of your superannuation income depends on your age and the type of income stream you receive. For most people, an income stream from a taxed super fund (which most funds are) is tax-free from age 60. If you are between 55 and 59, you may pay tax on the taxable portion of your income stream at your marginal tax rate, less a 15% tax offset. If you are under 55, you may pay tax on the taxable portion of your income stream at your marginal tax rate, unless you access your superannuation due to permanent incapacity.

Another source of retirement income for some small business owners is the sale of their business assets. If you sell your business assets, you may be eligible for the capital gains tax (CGT) retirement concession, which can exempt a capital gain on a business asset up to a lifetime limit of $500,000. To qualify for this concession, you must meet certain conditions, such as being at least 55 years old and using the proceeds to fund your retirement, by depositing the amount into your superannuation account.

Planning for retirement as a small business owner can be complex and challenging, but also rewarding. You should seek professional advice from a financial planner, an accountant, or a lawyer to help you make the best decisions for your future.