Becoming 'your own boss' may never be more attractive with proposed July superannuation changes
Release date: February 7th, 2007
AUSTRALIAN workers dreaming of being their own boss may now have a big incentive to become budding entrepreneurs with the proposed July superannuation changes.
ClearView Retirement Solutions technical manager, Helena Gibson, today stated that the proposed new superannuation legislation changes for the first time puts self-employed people on an equal footing with paid employees.
"Because of some of the additional benefits a self-employed person may receive, the proposed changes can make owning your own business as a self-employed person so much more attractive than currently," Ms Gibson said.
"It is impossible to predict how many Australians will say goodbye to the boss forever. But the proposed superannuation changes could be incentive enough for some people who've dreamed of being their own boss deciding to go it alone in their own businesses.
"Notwithstanding the risks that new small businesses face and their high failure rate, running your own business can be a profitable way of building your asset base. The proposed super changes can provide benefits when disposing of these assets and this may be especially attractive when done in combination with the capital gains tax relief that may be available under the small business concessions".
The proposed superannuation changes will be beneficial to the self-employed from their expected start date of 1 July 2007 in the following ways:
- Instead of being able to claim just the first $5,000 plus 75% of the excess up to their age-based limit, they will be able to claim a 100% tax deduction for their super contributions, subject to the relevant contribution limits.
- They will be able to hold total and permanent disability insurance through their superannuation tax-effectively. From 1 July 2007 part of the payment will be tax-free whereas now the entire amount of insurance payment via their superannuation fund is taxable.
- They will be eligible for the co-contribution scheme, which offers a bonus of up to $1,500 for a $1,000 contribution where qualifying conditions are met.
"Running your own business can be a profitable way of building up an asset base in the form of goodwill and commercial property," said Helena Gibson. "Under the proposed superannuation changes, an effective way of helping maximise the amount you can invest in superannuation in one go, may be through the sale of eligible business assets. Using the proceeds from the sale of these types of assets, a self-employed person may be able to contribute up to $1 million extra than employee counterparts, subject to meeting the relevant requirements,
"Of course, there are other issues to consider when considering selling business assets, such as the issue of maximising the net value of a business when the self-employed decide to sell and have to consider issues such as capital gains tax on the assets of the business and how this can be reduced using small business concessions such as the15-year exemption" and the "capital gains tax retirement exemption".
As always, the self-employed should seek independent competent financial advice before making major decisions to make the most of superannuation arrangements.
Any advice in this material is general advice only and does not take into account your individual objectives, financial situation or needs. Before acting on it you should consider the appropriateness of it taking into account your personal circumstances.
CFML and ClearView Life Nominees Pty Limited (the trustee of the ClearView Retirement Plan) are both members of the MBF Group.
All taxation and superannuation information is based on our understanding, and the continuation, of current taxation and superannuation legislation and on the proposed superannuation legislation changes, all as at 6 February 2007.
