Last time, we discussed how you can be prepared for the future rises in superannuation. Today we are addressing SuperStream and retirement planning & funding for both you and your small business.
What is SuperStream?
SuperStream is a government reform aimed at improving the efficiency of the superannuation system. SuperStream applies to all employers making super contributions and starts July 1, 2015 for small businesses (consisting of 19 or fewer employees) – so it’s best to get ahead of the curve on this one.
While you have a full financial year (until June 30, 2016) to figure it out, get on board with the new system and meet the SuperStream requirements when sending contributions on behalf of your employees. It is best to be prepared early so that you don’t fall behind. Under SuperStream, there is no time to catch up on late payments.
SuperStream can save your small business time and money by eliminating variations in how contributions can be made. This means a single channel for you to use when dealing with super funds, regardless of how many funds your employees contribute to.
So what do you need to do?
Employers can meet their SuperStream requirements by either using a software solution that conforms to SuperStream, such as Xero, OR a service provider who can arrange SuperStream compliance on your behalf. Your options may include:
- Upgrading your payroll software
- Using an outsourced payroll function or other service provider
- Using a commercial clearing house or the free Small Business Superannuation Clearing house
You’ll also need to collect the following additional information to make contributions using SuperStream:
- Fund’s ABN – all fund types
- Unique Superannuation Identifier (USI) – APRA-regulated funds only
- Bank account details – SMSF’s
- Electronic Service Address – SMSF’s
- Employee Tax File Number (TFN) – all fund types
Of course, every business is different and there is no one-size-fits-all approach to adopting SuperStream, so it’s important to seek independent advice.
If all of this seems a little overwhelming and you’re looking for some more information, the ATO have created a step-by-step employer checklist – you can find it here.
Now, many small business owners either don’t pay themselves super (if they’re a sole trader) or don’t pay too much attention to super – because after all, the plan is to sell their business to the highest bidder and live off the proceeds when they retire. And that’s a grand plan, right?
Sound familiar? It’s time to consider how can you be prepared when retirement comes knocking.
The ‘sell my business to top up my superannuation’ plan
If that’s you, you’re not alone. According to a 2014 study by The Guardian Life Insurance Company, 35% of small business owners are depending on the sale of their small business to fund their retirement. But, nearly half (48%) of all small business owners don’t feel well enough prepared to do that. Those who do have a plan in place, also report achieving greater business success and higher revenue.
But, before you rely on your future millions from selling your business, you have to ask the question, is your business actually saleable? If your answer was ‘no’, or even a vague ‘I’m not sure’, it’s time for a little strategic planning.
Firstly when people buy a business, they’re looking for a strong revenue and cash flow position. Managing your cash flow is a good way to ensure that your business has enough cash to meet tax, super and other financial obligations when they arise. Few buyers want to take on that sort of debt.
Understanding your current cash flow position and preparing cash flow projections for the future can keep your business on track, alert you to problems should they arise help you create a more financially stable position for your future and give any future buyers a greater sense that they’re buying something that won’t go belly up on final payment. You might want to read our blog on the four steps to strong cash flow management.
You might also read our blog on what else buyers look for when buying a business.
It is never too early to prepare your business for the future. In fact, you might want to start right now – and we’d love to help. You can call Kerry on 6023 1700, drop us a note or connect with Kerry via LinkedIn.