Superannuation payments pose a significant challenge to small-business owners, with one in four small business owner operators not currently making any superannuation payments. Almost three in five businesses with revenue of less than $75k (58 per cent) do not currently pay any super.
“Superannuation is complex and can be confusing for small-business owners,” said Jane Betschel, Head of Customer Marketing and Direct Sales at MYOB. “They may not fully understand their obligations as an employer, and they are also more likely to have fluctuating workforce arrangements. With variations in full-time, part-time or casual staff, it can be hard to keep track of the required payments.”
For the businesses that do make superannuation payments, almost a quarter (24 per cent) of operators surveyed revealed they had issues meeting payments due to cashflow issues.
“We know that cashflow is one of the big pain points for businesses, particularly small and medium sized enterprises,” Betschel said. “Owner operators may sacrifice their own super payments to ensure that payments owing to staff are met. They may also decide to pay bills that will keep the doors open today, at the expense of future, personal financial security. This is a reality for many small businesses.”
Further prioritisation occurs at end of financial year, when over two in five businesses (41 per cent) admit to struggling in some way to pay their EOFY tax expenses. Approximately one quarter of small business owners stated that they always or mostly prioritise paying the tax bill over their superannuation expenses at this time of year.
Reservations about retirement: what happens next?
Having enough money to fund their retirement was the biggest concern for small business owners (19 per cent), followed by the increasing cost of living (14 per cent). With only three in five operators (59 per cent) currently paying themselves superannuation, less than a third of operators felt very well or quite well prepared for their retirement (30 per cent).
Betschel said these results reinforce areas for education and policy development.
“SMEs are the backbone of the Australian economy. It is our responsibility to support and educate small business owners on how to best manage their finances to improve their chances of success.”
Almost half of those surveyed (45 per cent) were still more than 10 years away from retirement. Adjusting the amount of superannuation paid was the main method nominated by those not prepared for retirement to improve their situation (32 per cent), followed by continuing to work and build the business (15%) and alternative investments (10 per cent) to secure a comfortable retirement.
“There can be a bit of a grey area between business and personal finances for small business owners. Personal sacrifices can leave them on shaky ground come retirement,” Ms Betschel said. “Seeking out sound financial advice is an essential part of setting your business up for success. Managing your cashflow and understanding your P&L promotes better financial literacy and saving habits, which can enable super contributions as well as reduce the burden at tax time.”